Joint interim study committee on health care quality: final report

Joint Interim Study Committee -
. + Pq ! on Health Care Quality
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.- k* :+. %, , : ., &.-* " FINAL REPORT . :,. (.. ,;. .. , , S L~.~~,?.:& ;.*,
.. 3. November 30, 1996
MEMBERS
Representative Sue Grace, Co- chairman
Constance Harmsen -, . >
Dr. Robert J. Dunn
Representative Susan Gerard
? ~ l i ; Heaschc~!! a H~ oit~ m ~ ~
Greg Harris
Henry Grosjean
Mary Yarbrough
Barbara Sutton
Representative Paul Mortensen
Steve Barclay
John NirnsLy
Dr. Barbara Amg
Senator John Kaitts, C- an
Representative Andy Nichols
Senator Mary Hartley
Anne M c N m
Dr. Arlan Fuhr
Sandra Abalos
Dr. John Cnkkshank
Senator Ann Day
Senator David Pettrscn
Senator Sandra Kennedy
Mary Leader
B& ara Keilkg
Marci HaQsickson
TABLE OF CONTENTS
. Page
I . AUTHORITY AND SCOPE OF DUTIES . . . . . . . . . . . . . . . . . 2
11 . COMMITTEE ACTIVITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
m . SUBCOMMITTEE REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . .6
IV . COMMITTEE RECOMMENDATIONS . . . . . . . . . . . . . . . . . . 11
V . COMMITTEE MINUTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
I. AUTHOFUTY AND SCOPE OF DUTIES
The Joint Interim Study Committee on Health Care Quality was created by the
cooperative efforts of both the Speaker of the k z o n a House of Representatives Mark
Killian, and the Arizona Senate President John Green. The Committee was charged with
studying the following areas:
1. The establishment of consistent quality measurement standards, licensing
requirements and solvency requirements for providers, including health care
services organizations, hospitals, physician hospital organizations, provider
service networks, preferred provider organizations, and provider senice
organizations;
2. The availability, affordability and quality of small group health insurance;
3. Direct patient access to licensed health care specialties;
4. Provider credentialing, contracting, and termination issues;
5. Point of service options;
6. Provider access to managed care networks;
7. Cost implications for patients and employers, and;
8. H. R. 3 103, The Health Insurance Portability and Accountability Act of 1996.
In an effort to ease the administrative burden of running a committee comprised of
twenty- six members, the cornminee chose to divide itself up in the following manner:
Subcommittee # 1
" establishment of consistent quality measurement standards, licensing requirements and
solvency requirements"
( H. R. 3 103, The Health Insurance Portability and Accountability Act of 1996)
Subcommittee Chair:
Mr. Henry Grosjean
Members:
Ms. Constance Harmsen
Dr. Robert J. Dunn
Representative Susan Gerard
Representative Herschella Horton
Mr. Greg Hanis
Mr. Henry Grosjean
Ms. Mary Yarbrough
Ms. Barbara Sutton, CLU, ChFC
Staff: Kitty Boots
Subcommittee # 2
" direct patient access and point of service options"
Subcommittee Chair:
Dr. Anne McNarnara
Members:
Representative Paul Mortensen
Mr. Steve Barclay
Representative Sue Grace
Representative Andy Nichols
Senator Man, Hartley
Dr. Anne McNamara
Dr. Arlan Fuhr
Ms. Sandra A. Abalos
Stafi Jim Drake
Subcommittee # 3
" provider credentialing, contracting and termination and provider access
to managed care networks"
Subcommittee Chair:
Dr. John M. Cruickshank. D. O.
Members:
Dr. John M. Cruickshank, D. O.
Representative Sue Grace
Senator Ann Day
Senator David Petersen
Senator Sandra Kennedy
Ms. Mary Leader ( later replaced by Mr. Brian McNeil)
Mr. John Nimsky
Ms. Barbara Keilberg
Ms. Barbara Aung, D. P. M.
Ms. Marci L. Hendrickson
Staff: Lisa Block
11. COMMITTEE ACTIVITY
The Joint Interim Study Committee on Health Care Quality met as a full committee on
September 1 1, 1996 and November 12, 1996. Subcommittee # 1 held hearings on
September 17, 1996 and October 1, 1996. Subcommittee # 2 and Subcommittee # 3 held
hearings on September 17, 1996, October 1, 1996, October 15, 1996 and October 29,
1996.
111. SUBCOMMITTEE REPORTS
Subcommittee # 2 elected to draft a written report on its activity, while Subcommittees
# 1 and # 3 chose to make oral presentations in the November 12, 1996 hearing ( see
Committee Minutes). The report fiom Subcommittee # 2 is included below in its
entirety.
Report from Subcommittee # 2 ( authored by: Dr. Anne McNamara)
Overview:
The Joint Interim Study Committee on Health Care Quality was established in response
to a Strike- Everydung Amendment to HB 222' 8 made in the House Banking and
Insurance Committee on February 13, 1996. The purpose of the legislative study
committee was to evaluate and make recommendations concerning the quality of health
care.
Based on the extensive charge of the Committee and the large number of Members
assigned to the committee, three subcommittees were formed. The charge to
Subcommittee 2 was " to study ' direct patient access ' and ' point of service options ' in
terms of their impact on availability, aafordability, and quality of small group health
insurance as well as cost implications for patients and employers.
Membership:
Subcommittee 2 consisted of eight members:
Sandra A. Abalos, CPA, Abalos & Associates ( representing small business)
Steve Barclay, AZ Association of Health Maintenance Organizations
Arlan Fuhr, DC ( representing AZ Association of Chiropractic)
Representative Sue Grace
Senator Mary Hartley
Representative Paul Mortensen
Representative Andy Nichols
Anne McNamara, RN, Ph. D, Chair. ( representing AZ Nurses' Association)
Process:
Subcommittee 2 met four times to address issues charged to the group. Due to varying
views and opinions of the Subcommittee members, the following report represents the
findings of the Subcommittee for which there was general agreement. The study process
used included: review of prior health insurance legislation ( 1 990- 1996), statutory
language fiom other states, literature review of relevant studies, public testimony, and
committee discussion. The f ~ scto nsensus point was on definitions of " direct access"
and " point of senrice".
Direct Access: means a system in which enrollees or members in a managed care
company can refer themselves directly and without penalty to a specialist within the
managed care company's designated provider network without having to be referred by
the enrollee's or member's primary care provider.
Point- of- Service: means a delivery system or contact option that pennits a member or
enrollee of a managed care company to receive health care services outside the
designated provider network of the managed care company under the tenns and
conditions of the member's or enrollee's contract with the managed care company, with
higher co- insurance payments and deductibles associated with the point- of- senrice
option typically borne by the enrollee or member.
The purpose of the agreed- upon definitions was for a point of reference by the
Subcommittee during deliberations and discussion. The meaning of the term " specialist"
in the direct access definition was identified as a potential obstacle for the group to
complete its charge and therefore, the group moved beyond this stumbling block to the
bigger issues of consumer access.
Subcommittee members were encouraged to submit materials for critical review and
analysis to the committee. In addition, members were encouraged to invite experts to
share information with the committee. Many experts presented to the group, they
included; the CEO fiom United Health Care, the Medical Director from
SamaritanCHealth Partners, the Executive Director fiom the AZ Pharmacy Association, a
Chiropractic Physician, the Chairman of the AZ Nurse Practitioner Council, a patient
and Medicare beneficiary, and a Physical Therapist.
Frequently, the testimony received by the subcommittee appeared to be in conflict with
regard to the accessibility to certain specialists, namely chopractic care providers.
Conflict in testimony was also heard with regard to the cost of specialty care. However,
it was generally agreed that managed care companies appear to be increasingly open to
offering their members a wider variety of health care options. These increased options
are dnven by competition in the health care marketplace. Several members of the
Subcommittee believe that while changes are occurring, it is arriving at a pace that is far
too slow.
After researching statutes fiom other states, it was generally recognized by members of
the Subcommittee that solutions implemented in other states will not always provide
solutions to the problems facing Arizonans. Arizona is unique in terms of the number of
enrollees and members in managed care companies as well as the layout of Arizona's
statutory scheme.
Current Models:
Health Care Services Organizations, fiequently called HMOs, represent one of a variety
of models providing health care to individuals and businesses in Arizona. Most models
use the medical doctor/ doctor of osteopathy ( MDDO) as the " gatekeeper" or
" coordinator of care" for persons enrolled in health plans. Consumer demand has
initiated changes in " direct access" opportunities for consumers. Therefore, some new
HMO products are allowing consumers to make direct appointments with certain pre-determined
MD/ DOs without the prior approval of the prirnw care provider. A report
prepared by the American Association of Health Plans, revealed twenty- one states have
some form of direct access availability. This report brought to light the fact that thirteen
states currently have direct access to OBIGYN, two to Chiropractic, one to Podiatry, one
to Optometry/ Ophthalmology, one to Dermatology, and one to registered nurse
practitioners ( nurse midwives/ nurse anesthetist, nurse practitioners). Although most
direct access options are offered on a limited basis in HMO models, these options are
available to consumers. At this time, few HMOs are prepared to completely abandon the
traditional MDDO gatekeeper model.
Point- of- service options are offered by most of the HMOs in Arizona, as well as by
other types of managed care entities such as PPOs. These options are avadable to
virtually all employers, typically with an increased premium to cover the anticipated
higher out of network costs.
The reality of Medical Savings Accounts ( MSA) was discussed with passage of the
Health Insurance Portability and Accountablliry Act ( KennedyKassebaum bill). The
Subcommittee reviewed a chart that outlined existing state laws applicable to 1)
accountable health plans, 2) individual health insurance in Arizona, and 3) definitions
and key terms in the federal law ( KennedyiKassebaum). MSAs will provide employers
and employees the most liberal option related to choice of providers and direct access to
specialists. Arizona will need to be prepared for compliance with the federal law by
January 1, 1997.
-- Re cSoumbmmietn thdiast rioepnos: r t to the full Committee for discussion and deliberation Encourage " MD/ DO gatekeepers/ coordinators of care" to be true integrators of care.
Gatekeeper models may limit, rather than truly integrate patient care. Gatekeepers
may be financially penalized for refends to specialists. Those that may experience
- the trauma related to delayed decision- making are often patientdfamilies. Encourage integration of other health care professionals ( non MDIDO) in the
delivery of health care within managed care associations. A growing number of
studies suggest that other health care professionals may provide cost effective,
quality care to their patients. Attached are examples of studies that the Subcommittee
reviewed. We recognize that this is not an exhaustive list and that many studies were
- not made available to the subcommittee and subsequently not analyzed. Continue to strengthen options for small business owners to access quality, cost
- effective health insurance that is affordable. Integrate the concept of " Medical Savings Accounts" in Arizona to assure
compliance with federal mandates. We recognize that MSAs have the potential to
- increase consumer/ member participation in health care decision making. Encourage the full Committee to recognize that Arizona has an opportunity to create
state specific laws that assure compliance with the KennedyKassebaum bill.
Request a presentation to the hll Committee from the AZ Department of Insurance
- regarding any needed changes to current law. Encourage communication mechanisms for employers and employees to make their
desires and needs known to managed care associations in regard to services and
- benefits. Encourage further development of long- term products.
Summary:
Subcommittee 2 submits this report to the full Committee recognizing the time
constraints and limitations of the members involved. We recognize the importance of
these topics to the health and well- being of Arizonans. The philosophy of managed care
as the predominant health benefit payment system is admirable. The goals of cost
containment, patient satisfaction, and quality outcomes are consistent with the charge
given to this Subcommittee. We recognize that the health care marketplace is dynamic
and must be responsive to consumer/ provider demands. This report recognizes that
contributions can be made by other health care providers ( non MD/ DO) in the delivery
of health care and suggest that such providers may enhance the economic and quality
goals of managed care associations.
Members of the Subcommittee would like to stress the importance of employers
educating their employees with regard to health care options, the importance of long-tenn
care, and the increased use of " Medical Savings Accounts" for individuals truly
seeking unfettered choice. In addition, consumers of health care must recognize that
managed care organizations can respond to the desires of their enrollees only when those
desires are effectively communicated to the managed care organization.
N. COMMITTEE RECOMMENDATIONS
On November 12, 1996, the Joint Interim Study Committee on Health Care Quality
recommended that legislation be drafted to ensure Arizona's statutory alignment with the
provisions of the Health Insurance Portability and Accountabilty Act of 1996.
V. COMMITTEE MINUTES
Handouts and other distributed materials cited in the committee minutes are on file in the
Office of the Chief CIerk.
ARIZONA STATE LEGISLATURE
JOINT INTERIM STUDY COMMITTEE
ON HEALTH CARE QUALITY
Minutes of the Meeting
Wednesday, September 1 1, 1996
2: 00 p. m., Senate Hearing Room 1
Members Present
Ms. Abalos
Dr. Aung
Mr. Barclay
Dr. Fuhr
Mr. Grosjean
Ms. Harmsen
Mr. Harris
Ms. Keilberg
Mr. Landrith for Dr. Dunn
Ms. McNamara
Ms. Sutton
Representative Mortensen
Representative Grace, Co- Chair
Senator Kaites, Co- Chair
Members Absent
Dr. Cruickshank
Dr. Dunn
Ms. Hendrickson
. , Ms. Leader
Mr. Nimsky
Ms. Yarbrough
Senator Day
Senator Hartley
Senator Kennedy
Senator Petersen
Representative Gerard
Representative Horton
Representative Nichols
Staff
Ellen Poole, Research Analyst, Senate Banking and lnsurance Committee - 542- 31 71
Lisa Block, Research Analyst, House Health Committee - 542- 1 989
Jim Drake, Research Analyst, House Banking and lnsurance Committee - 542- 3862
Co- Chairman Kaites convened the meeting at 2: 05 p. m. and turned the meeting over to
Co- chairman Grace. He introduced her as the party who will take the lead in directing the
Committee.
Co- chairman Grace welcomed members and noted Committee recommendations are due
at the end of November, 1996, necessitating that members meet every other Tuesday until
that time. She acknowledged the Committee charge seems rather broad ( filed with original
minutes) but emphasized her wish to see the Committee as a place to focus on anually
recurring concerns and the controversy that surrounds them.
Representative Grace indicated that members would be divided into three Subcommittees
according to their expressed interests, as listed on a handout ( filed with original minutes).
She noted that each Subcornmlttee would deal w~ tha separate aspect of the charge, as
listed on another handout, ( filed with orlglnal mlnutes) and requested that Subcommittee
September 11, 1996
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STUDY COMMITTEE ON
HEALTH CARE QUALITY
# I additionally review the federal Kennedy- Kassebaum legislation to see if it requires
conforming legislation on the state level and also noted that Senator Day will be visiting
Subcommittee # 1 to insure it does not duplicate legislation she is developing.
Representative Grace further requested that members try to look at concerns in a fresh
perspective and not bring back old ideas for more mandates, as the sitting Legislature
would not be sympathetic to this approach. Representative Grace encouraged members
to develop fresh perspectives on how to better use existing resources without adding new
costs.
Senator Kaites requested that the full Committee receive a briefing on the Kennedy-
Kassebaum legislation to determine whether state statutes need to be brought into
conformance. Representative Grace asked that Subcommittee # 1 review the legislation
and provide its recommendations on necessary conformities to the full Committee.
Representative Grace asked that members next break out into their designated
Subcommittees to elect chairmen, reminding them to call upon legislative staff for
assistance and information. She announced subsequent meetings will be held in House
Hearing Room 3 as scheduled on a third handout ( filed with original minutes) distributed
to members.
Legislative staff, Ellen Poole, Jim Drake and Lisa Block, introduced themselves and related
that Ms. Poole will be staffing Subcommittee # 1, Mr. Drake will be staffing Subcommittee
# 2 and that Ms. Block will be staffing Subcommittee # 3. They each invited members to
contact them for assistance and Mr. Drake distributed a brief summary of health insurance
legislation in Arizona from 1990 to 1996 ( filed with original minutes).
Without objection, the meeting was adjourned at 2: 25 p. m. and members grouped
themselves in designated Subcommittees to elect chairmen.
Respectfully submitted,
. -
Alice Kloppel
Committee Secretary
MEETING OF COMMITTEE ON
Hearing Room N 0 . 3 f \ k 4 I
OPT€ cq - \ \ - c\ Q
\--~ ALTH C ~ e kG ui\ lr~ r T IME 2-: C ~ Cn! nq
REPRESENTING BILL NO.
ARIZONA STATE LEGISLATURE
JOINT INTERIM STUDY COMMITTEE
ON HEALTH CARE QUALITY
Minutes of the Meeting
Tuesday, November 12, 1996
1.00 p. m., Senate Hearing Room 1
MEMBERS PRESENT
Representative Grace, Co- chairman
Senator Kaites, Co- chairman
Senator Hartley
Senator Kennedy
Senator Petersen
Representative Gerard
Representative Horton
Representative Mortensen
Dr. Barbara Aung
Mr. Steve Barclay
Dr. Alan Fuhr
Mr. Henry GrosJean
Ms. Constance Harmsen
Mr. Greg Harris
Ms. Marci Hendrickson
Ms. Anne McNamara
Mr. Brian McNeil
Ms. Barbara Sutton
MEMBERS ABSENT
Senator Day
Representative Nichols
Ms. Sandra Abalos
Dr. John Cruickshank
Dr. Robert Dunn
Ms. Barbara Keilberg
Mr. John Nimsky
Ms. Mary Yarbrough
STAFF
Ms. Kitty Boots, Senate Analyst
Ms. Lisa Block, House Analyst
Mr. Jim Drake, House Analyst
Co- chairman Grace convened the meeting at 1: 15 p. m. and the attendance was noted.
She next called upon Subcommittee chairmen to report their recommendations to the full
Committee.
Henry GrosJean, Chairman, Subcommittee # Ir, e ported this Subcommittee discussed
issues surrounding health care quality measures and noted that progress is being
exhibited in this area with reporting requirements and performance measurements
developed by the National Committee for Quality Assurance ( NCQA). He indicated the
Subcommittee has a wait- and- see position relative to these national measures as it is still
in its infancy. Mr. GrosJean also related that Senator Day informed the Subcommittee of
her proposed appeals legislation, that Arizona Health Care Cost Containment System
( AHCCCS) representatives reported on its quality indicators program and that the medical
director of the Health Services Advisory Group, currently known as the Quality
Improvement Organization, explained its program to develop medical standards based on
patient perception with the aim of creating a more personal approach to health care
delivery.
November 12,1996
Page 2
JOINT INTERIM STUDY COMMITTEE
ON HEALTH CARE QUALITY
Mr. GrosJean indicated Subcommittee # aIl so heard testimony from the Department of
Insurance ( DOI) on the KennedylKassebaum bill and that the Subcommittee recommends
no legislative action be taken relative to its deliberations.
Anne McNamara, Ph. D., Chairman, Subcommittee # 2, submitted a four- page report
( filed with original minutes) in response to its charge to study direct patient access and
point- of- service options in terms of affordability, availability, quality of small group health
insurance and cost implications for patients and employers. She related the Subcommittee
recommendations, which also require no specific legislation at this time: 1) submit
Subcommittee report to full Committee, 2) encourage Medical DoctorlDoctor of Osteopathy
( MDIDO) gatekeepers/ coordinators of care to be true integrators of care, 3) encourage
integration of other health care professionals ( non MDIDO) in the delivery of health care
within managed care associations, 4) continue to strengthen options for small business
owners to access high quality, cost effective health insurance that is affordable, 5)
integrate the concept of " Medical Savings Accounts" ( MSAs) in Arizona to assure
compliance with federal mandates, 6) encourage the full Committee to recognize that
Arizona has an opportunity to create state- specific laws that assure compliance with the
KennedyIKassebaum bill and request a presentation by DO1 to the full Committee
regarding such, 7) encourage communication mechanisms for employers and employees
to make their desires and needs known to managed care associations in regard to services
and benefits and 8) encourage further development of long- term care products.
Dr. McNamara also related the Subcommittee's wish to stress the importance of employers
educating their employees with regard to health care options, the importance of long- term
care options and the importance of increasing the use of MSAs for individuals truly seeking
unfettered choice. In addition, she emphasized consumers of health care must recognize
that managed care organizations can respond to the desires of their enrollees only when
those desires are effectively communicated to the organization.
Dr. McNamara suggested that the concept of " integrator of care" is a good one, but it is
often jeopardized, as gatekeepers may be financially penalized for making referrals to
specialists. She emphasized not losing sight of incentives which may have a negative
impact on patients and their families.
In response to Senator Kaites' request to be provided with examples of how such penalties
are created in the system, Dr. McNamara referred to articles the Subcommittee reviewed
which looked at capitation models which recognized that referrals are deducted from the
primary care providers' full capitation.
Mr. Barclay clarified that some forms of compensation may create financial incentives or
penalties to cause providers to think twice before making referrals to specialists. He
JOINT INTERIM STUDY COMMITTEE
ON HEALTH CARE QUALITY
November 12,1996
Page 3
emphasized the Subcommittee did not intend to condemn the practice altogether, but to
raise the issue that it needs to be watched.
In response to Senator Kaites' request to hear examples or see statistics of how this
procedure drives down quality of care, Mr. Barclay responded he would provide some of
the numerous studies which have been published. Mr. Barclay further acknowledged the
studies are inconclusive and that most of them suggest there has not been a marked
decrease in the quality of care.
Dr. Barbara Aung, substituting for the Chairman, Dr. John Cruickshank,
Subcommittee # 3, reported on credentialing and recredentialing, the licensure process,
provider termination issues and provider impact on small business and employers. She
reported that Subcommittee # 3 recommends no legislation, but would like to impart
information to managed care organizations regarding coordinating the credentialing
process so as to avoid duplication and to reduce costs. Dr. Aung indicated information-sharing
among organizations would limit the amount of work providers have to undertake
to maintain credentialing and recredentialing. She also emphasized that sharing
information should extend to providers, employers and that employees, patients employers
should also be educated about regulations which managed care organizations expect
providers to follow and about what is expected in terms of providing services under their
contracts.
In response to Representative Grace's request for more information on the current
credentialing process, Dr. Aung acknowledged the Subcommittee is encouraged that the
process which formerly has seemed to be hidden is now sharing information more openly,
especially through the Greater Arizona Centralized Credentialing Program. She indicated
the Program is using set criteria based on NCQA guidelines for all providers in Arizona
and is sharing this information with the managed care companies in the State.
In response to Representative Grace's inquiry about the credentialing turnaround time for
the average practitioner, Dr. Aung indicated it is currently six months to one year and the
Program now has a mandate of 90 to 120 days which is an improvement. Dr. Aung noted
testimony revealed one hold- up in credentialing is trying to obtain past histories of
practitioners going back 20 years or obtaining histories from another country or state.
Mr. Barclay acknowledged this centralized clearinghouse has received certification as a
Centralized Verification Organization ( CVO) and is a very encouraging improvement,
noting that currently the primary source checks for practitioners are duplicated by every
plan, consuming lots of time and requiring sources to provide information on one
practitioner many times over.
November 12,1996
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JOINT INTERIM STUDY COMMITTEE
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Senator Kaites moved to accept the Subcommittee reports.
Representative Horton seconded the motion. The motion CARRIED by
a voice vote.
DEPARTMENT OF INSURANCE PRESENTATION
Greg Hams, Assistant Executive Director, DOI, distributed handouts ( filed with original
minutes) comparing key elements of the federal legislation, the KennedyIKassebaum bill,
to existing Arizona laws applicable to accountable health plans, MSAs and long- term care
insurance. He highlighted misconceptions about what the KennedyIKassebaum bill does
and discussed provisions that the Arizona Legislature will need to consider under
insurance laws and also noninsurance law issues which will need to be addressed.
Mr. Harris indicated the key piece of the federal legislation is one that addresses group
coverage and the ability of individuals who have been in group coverage to convert to
individual coverage. He noted that the Legislature will need to move legislation to comply
with the federal mandate defining small groups as two to 50 lives, eliminate the current 90-
day waiting period for groups to become eligible and change the current 12- month look-back
period to six months.
Mr. Harris explained the federal law now allows employers to establish a two- month
" affiliation periodn before employees become eligible to enroll in a health maintenance
organization ( HMO). He further explained that federal legislation prohibits the
consideration of pregnancy as a preexisting condition, requires no waiting period for
preexisting conditions if the employee had been previously covered by a group plan for 12
months before changing employers with no more than a 63- day break in employment and
allows an employee to carry waiting time forward if he changes employers.
Mr. Harris indicated there are no significant changes to Arizona's guaranteed renewability
laws, continuing to provide for renewal except where there are violations such as fraud or
deceit on an application. He related disclosure requirements will now be extended to
indemnity plans as well as managed care plans under the federal legislation and this will
need to be addressed by the Legislature.
Mr. Harris explained the federal legislation requires that if an insurer wants to exit a
particular segment of the market, it must stay out of the market for five years. He noted
there is no federal requirement for tie- in between participation in small, large or individual
markets as there is currently in Arizona law. In regard to the insurer's inability to serve a
specific market, it would need to withdraw from this segment only for 180 days and would
not need to withdraw from the insurance market altogether.
JOINT INTERIM STUDY COMMITTEE
ON HEALTH CARE QUALITY
November 12,1996
Page 5
Mr. Harris indicated that federal legislation requires all individual coverage be guaranteed
renewable. In regard to converting from group to individual coverage, he explained the
federal legislation provides this option once a person has exhausted any COBRA
( Congressional Omnibus Reconciliation Act) benefits available to him and can prove he
is not eligible for Medicaid or Medicare.
Mr. Harris explained federal long- term care provisions and viatical settlement provisions
use tax incentives as a way to encourage people to purchase products in a certain
direction. He also explained the federal MSA legislation creates a pilot project with a
nationwide cap of 750,000 participants. Mr. Harris indicated these will be administered by
the Department of Revenue in Arizona and the Federal Treasury will provide oversight to
insure the caps are maintained. He explained that the primary result of federal legislation
on long- term care policies is that benefits paid out will not be taxable income. He also
noted there will be no changes necessary in Arizona law in response to this provision. Mr.
Harris explained that federal legislation relating to viatical settlements mandates that any
cash- out of a policy used to pay for the costs of a catastrophic or life- ending illness are tax
exempt. He also indicated there is no need to change Arizona laws to comply with the
federal legislation in regard to viatical settlements.
In response to Representative Gerard's inquiry about federal mandates regarding mental
health parity, Mr. Harris explained that H. R. 3666, signed a couple of weeks after the
KennedyIKassebaum bill, does not require that a health plan include a mental health
benefit, establishing that if the cost to include a mental health benefit exceeds a one
percent increase in premium cost, the insurer is not required to include that benefit. He
confirmed Representative Gerard's understanding there is no mental health parity included
in the federal legislation.
Mr. Harris clarified that the KennedyIKassebaum bill and H. R. 3666 address not only state
insurance plans but also ERISA ( Employment Retirement Income Security Act) plans. He
explained the U. S. Department of Labor will continue to insure compliance of ERISA plans
with federal law, whereas DO1 will continue in this role for the State. Mr. Harris clarified
that legislation or another mechanism will need to be adopted to affirm that DO1 has the
specific regulatory authority in this area.
In response to Senator Petersen's inquiry about how the federal preexisting conditions
provisions affect congenital birth defects, Mr. Harris explained that if a child is covered
under an existing plan for the condition at birth and before moving to a new policy, the
federal legislation would not allow a preexisting condition exclusion if the family moves to
a new plan.
In response to Senator Petersen's inquiry about simple interest on long- term care benefits,
Mr. Harris explained he could not answer the question specifically today, but indicated the
November 12,1996
Page 6
JOINT INTERIM STUDY COMMITTEE
ON HEALTH CARE QUALITY
federal legislation addresses this area on a perdiem or lump sum basis which may have
some bearing on the issue. In regard to income thresholds in long- term care, Mr. Harris
explained the federal legislation establishes a mechanism that would allow a person to
choose between a lump sum or perdiem payout of benefits with variable tax
consequences.
Representative Grace inquired about the relationship between health conditions which
may affect pregnancy and federal preexisting conditions provisions. Mr. Harris explained
that pregnancy, which cannot be treated as a preexisting condition, would be taken out of
consideration, the ancillary condition would be treated separately and it would be
determined by further inquiry whether the ancillary condition was pregnancy- related or
preexisting.
In response to Dr. McNamaraJs concern about self- employed people with potential health
issues being denied coverage, Mr. Harris confirmed the KennedyIKassebaum bill does not
address eligibility, but emphasized that Health Care Group, already in existence, provides
programs for self- employed groups from one to 40 with no preexisting condition exclusion,
but with a limitation on benefits for preexisting conditions.
Dr. McNamara also inquired about protection for the individual when an insurance
company decides not to renew and Mr. Harris explained this issue is left, in part, for the
states to address. He further explained that under S. B. 1 109, passed in 1993, if an insurer
wants to pull out of a line of business or rid itself of a particular group, the consequences
are high; it must be out of the market for a long while and a six- month notice must be given
to customers.
Mr. Barclay added that the KennedylKassebaum bill will also apply to the public plans,
such as Health Care Group. In response to his request to know if the State needs to do
anything to comply with federal MSA provisions, Mr. Harris explained this needs more
study but noted the Department of Revenue is the agency through which MSA companies
must register and that DO1 has not thoroughly studied the issue.
Mr. Barclay noted the federal legislation makes it possible for federally qualified HMOs to
participate in the high deductible coverages that would overlay the MSAs and suggested
there may be a need for a change to the state HMO laws to allow this flexibility. Senator
Kaites acknowledged the need to address this issue in a separate piece of legislation
affecting Title 42 rather than Title 20.
Mr. Barclay likened an MSA to a financial product such as an Individual Retirement
Account, but asserted since the high deductible coverage is the piece that needs to be
reworked, this would require a Title 20 change as well. He acknowledged the entire issue
may require two pieces of legislation.
JOINT INTERIM STUDY COMMITTEE
ON HEALTH CARE QUALITY
November 12,1996
Page 7
Representative Grace related that Senator Day has opened a bill file to address issues
relating to health care quality and agreed it is appropriate that a bill be moved in the next
session.
Mr. Barclay commented there will be a rush to participate in the MSA pilot project which
has an effective date of January 1, 1997 and that his Subcommittee suggests any
legislation affecting this should be fast- tracked, while legislation affecting other
KennedyIKassebaum compliance issues can wait a little longer.
Senator Kaites moved the Committee recommend legislation be drafted
to deal with the main issues relating to Medical Savings Accounts as
well as the general issues outlined by the Department of Insurance
relating to implementation of the federal KennedyIKassebaum bill.
Representative Mortensen seconded the motion. The motion CARRIED
by a voice vote.
Senator Kaites instructed staff to coordinate with Senator Day, who is already working on
related legislation, and asked staff to distribute all draft legislation to Committee members
as it is developed.
Representative Grace announced there would be no more meetings scheduled and
adjourned at 2: 15 p. m.
Respectfully submitted,
Alice Kloppel,
Committee Secretary
( Tapes and attachments on file in the Office of the Senate Secretary)
November 12,1996
Page 8
JOINT INTERIM STUDY COMMITTEE
ON HEALTH CARE QUALITY
MINUTES OF
SUBCOMMITTEE # I OF THE
STUDY COMMITTEE ON HEALTH CARE QUALITY
DATE: Tuesday, September 17,1996
TIME: 10: OO a. m. - noon
PLACE: House Hearing Room # 3
Members Present:
Dr. Robert Dunn
Ms. Constance Harmsen
Mr. Greg Harris
Ms. Mary Leader
Ms. Barbara Sutton
Representative Herschella Horton
Mr. Henry Grosjean, Chairman
Members Absent:
Ms. Mary Yarbrough
Representative Susan Gerard
Senate Staff: House Staff:
Ellen Poole Mark Bogart
Jim Drake
Chairman Grosjean called the meeting to order at 10: lO a. m. and explained the
meeting agenda calls for discussion of the federal Kennedy- Kassebaum Bill and the
current status of the establishment of quality measurement standards, licensing
requirements, and solvency requirements.
Ms. Poole stated the Arizona Health Care Cost Containment System ( AHCCCS) is
presently reviewing the Kennedy- Kassebaum Bill and will be preparing an analysis and
recommendations. She added the Department of Insurance ( D01) is conducting a
similar review. Ms. Poole explained she was unabie to get in touch with AHCCCS
personnel to make a presentation to the subcommittee today, but hopes to do so by the
next meeting.
Mr. Harris explained DO1 has not completed its review of the Kennedy- Kassebaum Bill
and would prefer to wait for that information before giving a formal presentation.
Chairman Grosjean opened the discussion to the quality of health care and what
" quality" means in terms of hospitals and providers.
Ms. Harmsen referred to the following handouts ( filed with original minutes) relating to
hospitals and their definition of quality:
SUBCOMMITTEE # I OF THE
STUDY COMMITTEE ON HEALTH CARE QUALITY
September 17,1996
Page 2
Quality Indicator Project - Maryland Hospital Association ( MHA)
In 1985 Maryland was the initial group to make the effort to provide indicators for
quality and most states look to Maryland when trying to develop effective
indicators.
Exhibit 2 - Acute Care Nursing Quality Indicators
Examples of quality nursing that the American Nursing Association ( ANA) is
attempting to establish in all of the states. Arizona received a grant and a
number of the acute care facilities in the state will be participating in the ANA
project over the next three years.
Samaritan Health System Clinical Quality Indicators Results by Facility
Example of the indicators for the Samaritan facilities which is presented to the
board on a quarterly basis.
Samaritan Health System - Definitions For All Performance Indicators
Gives an idea of the challenge in gathering data to insure an accurate
indicator is obtained.
Samaritan Health System Quality Plan
Example of definitions of quality and how hospitals are viewing quality.
HEDIS 2.0: Executive Summary
( Health Plan Employer Data and Information Set) Source used by managed
care plans and out- patient settings in demonstrating quality indicators.
Chairman Grosjean stated he understood there is a new HEDlS 3.0 version. Ms.
Harmsen indicated she did not know and was not an expert in the area.
In responding to Chairman Grosjean, Ms. Harmsen indicated Maryland's information is
public, however, individual states make their own decisions to publicize information.
She added it was her understanding that Arizona's is not public.
Ms. Harmsen indicated there were two journals published this year rating Health
Maintenance Organizations ( HMOs) using the HEDIS information.
Representative Horton, a registered nurse for many years, stated quality means
different things to different people, is very difficult to measure, and needs to be defined
as far as balancing quality with cost. In response to Chairman Grosjean, she stated
she did not think the Legislature has any preconceived notions regarding this issue.
Dr. Dunn stated he has a fee- for- service practice in Mesa, and also contracts with 32
HMOIPPO's. He apologized for not attending the first meeting and questioned if the
subcommittee is concerned only with quality of managed care as opposed to
physicians, hospitals, managed care insurance companies, etc. He stated he has
September 17,1996 SUBCOMMITTEE # OlF THE
Page 3 STUDY COMMITTEE ON HEALTH CARE QUALITY
experience in quality review and pointed out that some hospitals take care of more
critically ill people and therefore have a higher instance of mortality.
Ms. Sutton stated quality of care is a big issue and carriers and consumers define it
differently. She noted as more people are moving to a managed care environment,
they are concerned about their accessibility to a physician they prefer and most
managed care companies have accommodated those concerns to some extent. She
added she also serves on the HMO task force which is attempting to address complaint
procedures. Other problems she identified are the inability to obtain health care and
the ability to retain health benefits at an affordable cost when a person leaves their
employment.
Ms. Sutton suggested the subcommittee look closely at outpatient studies in terms of
establishing standards and conceded it was a tremendous challenge for one
committee.
Mr. Harris stated DO1 receives complaints addressing the quality issue, both with
respect to managed care plans and indemnity plans. He stated the issue prompting the
establishment of the task force was whether there needs to be a mechanism within
state government, and if so, where should it be located.
Mr. Harris noted under current law DO1 has the responsibility for the solvency of
insurance companies and for managed care organizations like HMOs. He suggested ,
the subcommittee should determine whether there is a need for new legislation, or if the
legislation in place is sufficient, and proceed from there. He emphasized it is important
not to lose sight of the distinction in the way people receive their health care ( i. e.
indemnity versus managed care).
In response to Ms. Sutton, Mr. Harris stated the number of complaints against HMOs as
opposed to fee- for- service providers is probably comparable, but the public perceives
HMOs as having more complaints.
Dr. Dunn stated a problem he encounters is that patients do not understand what is
offered in plan brochures and would suggest a program to educate the consumer. Ms.
Sutton stated that should be the responsibility of insurance agents or consultants and
employers should provide employee informational meetings. She added the
mechanism is in place, but perhaps is not being followed, and ultimately it is the
employee's personal responsibility to study the options available.
SUBCOMMITTEE # 1 OF THE September 17,1996
STUDY COMMITTEE ON HEALTH CARE QUALITY Page 4
Chairman Grosjean suggested insurance provider brochures should be more consumer
friendly.
Dr. Dunn stated that problems also arise when a patient chooses an HMO and then
finds out that a particular treatment is not a covered expense ( i. e. transplants).
Representative Horton stated people cannot predict future medical needs, and they do
not expect to be " dumped" when a catastrophic illness arises after paying premiums for
many years.
In response to Ms. Sutton, Dr. Dunn stated the Medical Association does not set out
protocols. Ms. Harmsen indicated some professional associations do have protocols
that are monitored through their own quality review departments.
Ms. Harmsen suggested the subcommittee discuss the ways available to assure safe,
quality health care and submit recommendations to the Legislature. She stated to
effectively study the issues, expertise from other states should be gathered and
presented to the subcommittee.
Dr. Dunn proposed first establishing a mission statement. Representative Horton read
what she believed to be the mission statement of the subcommittee: To establish quality
measurement standards, licensing requirements and solvency requirements.
Representative Horton suggested the next meeting's agenda address the existing state
requirements regarding consistent quality measurements, licensing and solvency.
Mary Leader, Governor's Policy Advisor for Health and Human Services, suggested
DO1 and DHS as information resources and noted AHCCCS is in the process of
developing outcome measurements for their health plans.
Representative Horton stated it's " kind of hard to know how you're going to get there
when you don't know where you are right now" and suggested the subcommittee
develop a baseline of what the State has in place presently for licensing and solvency
requirements.
Mr. Harris, addressing the solvency issue, stated DO1 is well equipped to measure the
financial strength of companies. He suggested one of the issues the subcommittee
may want to look at are entities that deliver health care that are not licensed as
insurance companies, such as provider hospital groups or other groups that share in
the commerce of health care. He explained an area untouched by legislation is an
September 17,1996 SUBCOMMITTEE # 1 OF THE
Page 5 STUDY COMMITTEE ON HEALTH CARE QUALITY
entity ( i. e. doctor, hospital), not in the business of assuming risk, that is not required to
be licensed by DOI. The only license required is that relating to medical practice. He
added some states have considered solvency requirements since the doctor or hospital
could potentially fail.
Representative Horton agreed there should be some kind of solvency requirements
because some hospitals and clinics have filed bankruptcy. She suggested the next
meeting could address what baselines are presently in place addressing these issues.
In response to Ms. Sutton, Mr. Harris stated legislation would be required for DO1 to
establish any additional licensing criteria for any entity that does not already fall under
the scope of Title 20. He indicated DO1 works with the Governor's Office to develop
programs and recommendations.
Representative Horton emphasized that one of the complaints she hears from providers
is that the more licensing requirements imposed, the more the cost is driven up and the
Legislature has looked very carefully at that issue as a means of keeping down the cost
of health care.
Mr. Harris stated DO1 does look at solvency when regulating HMOs and has shared
regulatory responsibility over HMOs with the Department of Health Services ( DHS).
Representative Horton suggested a representative from DHS present information on
licensing requirements at the next subcommittee meeting.
In response to Chairman Grosjean, Mr. Harris stated there is no statute defining or
regulating a Physician Hospital Organization ( PHO). He added if a PHO is assuming
insurance risk, then they would be subject to licensing requirements as an insurer.
Chairman Grosjean called for a ten- minute recess at 1 1 : 10 a. m.
The meeting reconvened at 1 1 : 20 a. m
Representative Horton suggested that at the next meeting representatives from DHS,
DO1 and AHCCCS present a briefing on Arizona licensing, solvency and quality
measurement standards compared to other states and a review of the Kennedy-
Kassebaum Bill.
SUBCOMMITTEE # 1 OF THE
STUDY COMMITTEE ON HEALTH CARE QUALITY
September 17,1996
Page 6
Mr. Harris stated he would not be able to attend the next meeting on October 1, 1996,
however, if available, Mary Butterfield from DO1 could take his place in the discussions.
Ms. Poole stated she was informed by Lisa Block, the House Health Analyst, that
because of Senator Day's schedule, this subcommittee meeting time would be moved
to 3: 00 to 5: 00 p. m. Representative Horton stated she prefers the 10: OO to noon
schedule and has some of the same concerns as Senator Day.
Ms. Sutton suggested both subcommittees could meet at the same time since the same
members were not on both subcommittees. Mr. Poole suggested the subcommittee
members discuss it with the Study Committee cochairpersons, Senator Kaites and
Representative Grace. Ms. Sutton agreed, so that everyone can be accommodated.
In response to Ms. Harmsen, Ms. Poole indicated Senator Day had a conflict with
another committee meeting and could not address the subcommittee today regarding
HMOs. Ms. Harmsen suggested that Senator Day's presentation also be added to the
next subcommittee meeting agenda.
Chairman Grosjean stated he wanted to keep the 10: OO a. m. time and would contact
the subcommittee members as to where the next meeting would be held.
Ms. Sutton suggested if Senator Day is unable to attend the October 1, meeting she
could provide written material for distribution to the members.
Representative Horton suggested the Directors of DHS, DO1 and AHCCCS be
contacted to select the person they want to speak to the subcommittee. Ms. Leader
stated she would be meeting with the agency directors this afternoon and would ask at
that time.
Ms. Harmsen asked for the background materials on the Kennedy- Kassebaum Bill
which was to be provided at today's meeting, based on last week's discussions.
Representative Horton stated she has a brief summary which she obtained by calling
the National Conference of State Legislatures. Chairman Grosjean asked Ms. Poole if
she would get a copy of the summary and make it available to the members.
Ms. Harmsen inquired whether there is agreement that the overall charge or goal of the
subcommittee is to assure the public safe, quality health care and to establish a
baseline. Representative Horton read the charge of the subcommittee from a letter she
received from Senator Kaites and Representatwe Grace: " This subcommittee will
address the issue cited in the committee charge as item # A, specifically, the
September 17,1996
Page 7
SUBCOMMITTEE # I OF THE
STUDY COMMITTEE ON HEALTH CARE QUALITY
establishment of consistent quality measurement standards." She added this includes
licensing requirements and solvency requirements. Ms. Sutton stated her notes from
the first meeting indicate that the subcommittee is supposed to discuss the issue of a
quality measurement standards " report card".
Representative Horton explained this is a Joint Interim Study Committee, established to
make recommendations to the Legislature that possibly will result in legislation. The
Committee may find that only administrative changes are required.
Ms. Leader clarified that the subcommittee is looking at all aspects of health care, not
just managed care. Chairman Grosjean and Representative Horton agreed.
Chairman Grosjean adjourned the meeting at 11: 35 a. m.
Respectfully submitted,
Tapes on file with the Secretary of the Senate's Office.
ARIZONA STATE LEGISLATURE
JOINT INTERIM STUDY COMMITTEE
ON HEALTH CARE QUALITY
SUBCOMMITTEE # 1
Minutes of the Meeting
Tuesday, October I , 1996
1 0: 00 a. m., House Hearing Room 3
MEMBERS PRESENT
Mr. Henry GrosJean, Chairman
Dr. Robert Dunn
Representative Susan Gerard
Ms. Constance Harrnsen
Representative Hershcella Horton
Mr. Brian McNeil
Ms. Mary Yarbrough
MEMBERS EXCUSED
Mr. Greg Harris
Ms. Barbara Sutton
STAFF
Ellen Poole, Senate Analyst
Chairman GrosJean convened the meeting at 10: 10 a. m. and the attendance was noted.
PRESENTATION ON THE HMO TASK FORCE
Senator Ann Day, HMO Task Force, related accomplishments of the Task Force which,
she noted, has finished its work. She indicated the Task Force agreed upon a health care
appeals bill which develops internal mechanisms insuring that quality health care is
delivered to all customers in the State. Senator Day noted the bill provides for government
procedures only when internal mechanisms do not accomplish their goal. She explained
the formal appeals process is for customers of all health plans in the State, including
indemnity plans, who have been denied health care services. It requires that the health
plans relate what factors they are going to rely upon to provide services and to adopt
written, objective and clinically valid standards and criteria to determine when medical
services must be provided. Senator Day noted these determinations of what is medically
necessary have been left up to the plans and will be applied in any denial of a covered
service and used as a basis for reviewing the denial. Once a patient and physician are
informed of a denial, they are also informed of their right to request an appeal and may ask
the Department of Insurance ( DOI) to set up an independent review panel to determine
compliance and fairness. Senator Day stated that a requirement to refrain from retaliation
against physicians and providers who inform their patients of other treatment options is
also being set forth.
Senator Day emphasized the proposed legislation deals with quality of health care
delivery, explaining that the Board of Medical Examiners will look at complaints against
physicians for " quality of care," that DO1 will provide recourse to customers in reviewing
October 1,1996
Page 2
STUDY COMMITTEE ON HEALTH
CARE QUALITY - SUBCOMMITTEE # 1
the delivery of care appeals processes and determining when patterns or systemic
problems occur; and that the Department of Health Services ( DHS) which will engage its
statutory oversight authority, to include visiting and investigating its licensees to insure
compliance with the quality assurance plans they file in order to receive certificates of
authority to deliver health care in Arizona.
Senator Day reviewed the timeline for the appeals process which begins with a
reconsideration after the initial denial within 30 days, followed by an independent external
reyiew by contacting DO1 or another formal internal review within the health plan. If the
patient is denied treatment in this process, he or she can request that DO1 set up an
external appeal by a panel of experts. Senator Day explained the panel could be made
up of one, two or three board certified physicians. She also noted there is a provision for
expedited appeals, which would probably only require one medical expert to review.
Representative Gerard noted she is also a member of the Task Force and emphasized the
goal was to establish flexibility in naming a panel of experts which would be determined
by what is being treated, e. g. to also address instances where a rare disease or condition
exists that only one expert in the nation may be able to address.
Mr. GrosJean asked if the appeals process is designed to complement the grievance
procedures that are already set up in the health plans.
Senator Day explained it establishes consistency so that all health plans are included
under this law and will handle appeals under the same timeline. She noted that any direct
or indirect denial of a covered medical service is the trigger which activates the appeals
process.
Senator Day also defined appeal as the external process used when a covered medical
service is denied and grievance as being something the health plan handles internally.
Ms. Harmsen asked if the Task Force performed an analysis of volume expectations, i. e.,
the number of customers who would utilize this process.
Senator Day indicated this was not discussed on the Task Force and Steve Barclay,
Arizona Association of Health Maintenance Organizations ( HMOs) provided input at
her invitation.
Mr. Barclay indicated the volume is an unknown, however expressed his view it will not be
excessively large and that most of the issues will be resolved internally. He explained
language has been designed not to address coverage issues, but to address issues where
there is a legitimate difference of opinion as to what is medically necessary. Mr. Barclay
expressed his hope the proposed legislation will codify existing practice and not add to it.
STUDY COMMITTEE ON HEALTH
CARE QUALITY - SUBCOMMllTEE # 1
October 1, 1996
Page 3
In response to Mr. GrosJean's request to know if any health carriers would be excluded
from the proposal, Senator Day expressed her understanding all plans which assume risk
are included.
DISCUSSION OF KENNEDY- KASSEBAUM BILL
Mary Butterfield, Assistant Director, Life and Health Division, DOI, distributed a
summary ( filed with original minutes) comparing specific aspects of current Arizona law
and the new federal law effective July 1, 1997. She reviewed the primary components of
the Kennedy- Kassebaum Bill which will require modification of Arizona statute, noting the
most significant components are the guaranteed renewability, portability and guaranteed
issue to small employers of two to 50 employees.
In response to Mr. GrosJean's inquiry about offering one or two like policies, Ms.
Butterfield acknowledged a higher and a lower benefit policy must be offered based on an
actuarial assumption of the value of the benefits.
Mr. GrosJean asked if this will apply to group policies as well as individual policies, and
Ms. Butterfield expressed her understanding it would not.
Mr. GrosJean asked if Ms. Butterfield foresees any regulatory actions becoming necessary
in order to comply. Ms. Butterfield acknowledged DO1 will be making recommendations
for revisions in the group health laws which conflict with or inhibit the application of the
new federal law.
In response to Mr. GrosJean's request for further elaboration on preexisting conditions
provisions, Ms. Butterfield explained that if a group health plan does not have a preexisting
waiting period, an HMO may have an affiliation, or waiting, period requirement where a
member must be enrolled, but not yet be paying a premium, for two or three months.
Ms. Harmsen questioned the role of the Study Committee in addressing conformity with
the Kennedy- Kassebaum Bill.
Ms. Butterfield indicated DO1 will be making recommendations to the Governor's Office for
legislation to be introduced in the upcoming legislative session. She additionally noted a
report on Arizona conformity measures must be made to the federal government by July,
1998.
Mr. GrosJean agreed the Committee may not be in existence that long and may not be
privy to these measures.
October 1,1996
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STUDY COMMITTEE ON HEALTH
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Colleen Schroeder, Administrator, Healthcare Group ( HCG) of Arizona, explained
HCG is a separate organization within the Arizona Health Care Cost Containment System
( AHCCCS) program offering health care coverage to small businesses with 40 or fewer
employees, including the self- employed. Ms. Schroeder distributed a handout ( filed with
original minutes) highlighting the impact of the Kennedy- Kassebaum Bill on HCG and
reviewed the provisions in Arizona statute which will need revision to conform.
In response to Representative Horton's inquiry, Ms. Schroeder confirmed Medicare would
be included in the portability expansion of Medicaid.
Mr. McNeil asked if HCG has studied how premiums may be impacted by the conforming
changes. Ms. Schroeder responded that this work has not yet begun.
In response to Mr. McNeil's further inquiry about an HCG timeframe for accomplishing this
work, Ms. Schroeder indicated she would be attending a conference in Los Angeles next
week, after which work would begin, recognizing the limited timeframe HCG is under.
DISCUSSION OF SOLVENCY ISSUES
Debi Wells, Assistant Director, Office of Policy Analysis and Coordination, AHCCCS,
discussed the capitalization, financial viability standards and reporting requirements for
AHCCCS health plans. She distributed a handout ( filed with original minutes) specifying
requirements.
Ms. Butterfield additionally reviewed the financial requirements for an Arizona Certificate
of Insurance listed on the last page of her original handout.
Ms. Harmsen asked how many of the insurance companies as well as HMOs are not able
to meet these state requirements.
Ms. Butterfield responded that if insolvency does occur, DO1 puts the company under
supervision or into receivership. She indicated she could not provide a specific number,
expressing her understanding there are no current difficulties. Ms. Butterfield
acknowledged that in the 1980' s one or two companies were put under some sort of
supervision, merged with another company or went out of business.
Ms. Harmsen asked if enrollees of health plans are made aware of financial problems. Ms.
Butterfield indicated they are not specifically made aware, unless perhaps, their enrollment
is affected. She acknowledged there may be a need to notify enrollees if their company
was going to be reviewed in a public hearing or if very serious events were going to take
place.
STUDY COMMITTEE ON HEALTH
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October 1,1996
Page 5
Mr. GrosJean asked if a physicians' organization would fall under the financial parameters
discussed. Ms. Butterfield indicated these parameters would apply only if the organization
was licensed. She explained the level of activity is reviewed to determine whether or not
the organization needs a license, clarrfying that if they are not assuming risk or transacting
insurance they do not need a license.
In response to Mr. GrosJeanls further inquiry, Ms. Butterfield indicated Premiere Health
Plan is physicians' organization that obtained a license and would fall under the financial
requirements outlined.
Representative Horton asked if the two percent deposited in the Treasurer's Office by
HMOs serves the same purpose as the guaranty fund does for indemnity plans.
Ms. Butterfield indicated this two percent does not act in the same way as the guaranty
fund, but provides protection for a specific period of time. She also noted that HMOs are
required to take on the enrollees of any HMO which might become insolvent.
Mr. Barclay related that the national failure of Maxi Care in the mid 1980' s spurred the
tightening of solvency requirements, but that the HMO industry decided at that time it
would rather increase its solvency requirements than participate in the guaranty fund. He
related that all the Maxi Care enrollees were absorbed by other HMOs on a " blind" basis
upon the failure of this company. Mr. Barclay also noted early warning mechanisms have
been instituted, such as monthly reports of the numbers of providers dropped from a
network, suggesting a large number might be a sign the company is in trouble and needs
review. He asserted the increased efforts by the HMO industry are an adequate substitute
for participating in the guaranty fund.
DISCUSSION OF HEALTH CARE QUALITY MEASUREMENT STANDARDS
In response to Representative Gerard's request for input on the ongoing efforts of the
National Committee for Quality Assurance ( NCQA), Ms. Wells explained AHCCCS is using
NCQA's Health Plan Employer Data and Information Set ( HEDIS) as a baseline for
development of its activities, though indicated she could not speak to its impact on the
private sector. She noted that HEDIS has gone through a few revisions, indicating
AHCCCS is currently looking at the cumulative HEDIS 3.0 to see how it can comply.
Ms. Wells discussed the AHCCCS Quality Indicators Program, reviewing its purpose, the
indicators, timelines and specific acute care, long- term care, developmentally disabled,
and behavioral health related quality indicators as outlined in a handout ( filed with original
minutes).
October 1,1996
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STUDY COMMITTEE ON HEALTH
CARE QUALITY - SUBCOMMllTEE # I
Ms. Wells emphasized the Program is not intended to be punitive, but a vehicle for
continuing improvement and a focal point for future efforts among AHCCCS plans, noting
these quality measures can be reviewed during contract cycles and used to help determine
if and when sanctions are needed. She indicated that looking at outcomes is key and is
accomplished by compiling encounter data, e. g., the services received by a member on
a specific date, since AHCCCS does not use billings.
Ms. Wells discussed the current status of the Program, indicating AHCCCS is furthest long
with the Acute Care Program and emphasized the need to interpret data carefully, not
misconstruing a high number of low birth rates as a negative for a particular health plan
where high- risk pregnancies may be referred because this happens to be its area of
expertise.
Ms. Yarbrough asked if AHCCCS risk- adjusts its data and Ms. Wells confirmed this is the
intent.
Representative Gerard acknowledged risk is a critical determinant and must be adjusted
for. She expressed her hope AHCCCS does use risk adjustment.
Ms. Harrnsen commended the AHCCCS Quality Indicators Program and asked when it will
become part of the contracting process. Ms. Wells responded there is no date certain and
that AHCCCS would probably not be able to use it in the March 1997 contracting cycle.
Ms. Wells commented on the lessons AHCCCS has learned in the process; emphasizing
that it is essential to have collaboration among all parties involved, that it is important that
everyone involved understands each others' languages and clinical systems and that it is
necessary to view things from a variety of perspectives, making refinements along the way.
Ms. Wells noted that Arizona is further along than any other state in the development of
quality indicators in its AHCCCS Medicare program, so the Health Care Finance
Administration ( HCFA) has indicated it will continue to be partners with it.
Ms. Yarbrough asked how it will become apparent the State is doing a good job. Ms. Wells
responded it will become known when AHCCCS members respond on surveys that
information they received on health plans was helpful and when the health plans indicate
they are being treated fairly, or in summary, when all parties are satisfied.
Mr. Barclay related there is also an accreditation effort being driven by national entities
such as NCQA, which has focused on bringing quality measurements and provider
credentialing to managed care. He referred to articles on NCQA which were distributed
to members ( filed with original minutes) which state 35 percent of the accreditation
decision is on quality management and improvement and 25 percent of the decision deals
with credentialing. He noted accreditation is becoming known as a benchmark of quality
STUDY COMMITTEE ON HEALTH
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October 1,1996
Page 7
and customers are demanding it. Mr. Barclay indicated HEDlS is the measuring tool and
continues to evolve and expand quality benchmarks, becoming more outcome- based than
in the past.
Mr. Barclay noted there has been no similar system for indemnity plans and emphasized
managed care has facilitated the collection of data to initiate the measurement of quality.
He also noted that the Accountable Health Plan Act of 1993 contains provisions that
require health plans to file a quality assurance program with DOI. Mr. Barclay
recommended leaving this process of quality assessment to the private sector, Medicare
and Medicaid as opposed to putting it into legislation, as the area is evolving too fast for
legislation to keep up with.
Representative Gerard agreed with Mr. Barclay that it is not appropriate for the State to
be trying to set up a quality indicator program because the private sector is moving forward
with it. She also cautioned against the potential to develop different standards in each
state, and emphasized the need to allow the free market to do its job as it currently is in
developing national standards.
Mr. GrosJean distributed a handout entitled " Quality Compass," available on the Internet,
( filed with original minutes) which discusses national averages of childhood immunization
rates, mammography screenings, percentage of readmissions of mental health patients,
etc., and compares providers in specific regions to national averages for the benefit of the
consumer. He suggested this type of information becoming available may encourage
carriers to become involved with HEDlS to adopt standards.
Herb Rigbert, Medical Director, Health Sewices Advisory Group, explained his group
is the peer review organization for Medicare in Arizona and is currently known as the
Quality Improvement Organization. He related he was a member of the committee which
developed HEDIS 3.0 in Washington, D. C., explaining it has come a long way in linking
indicators to outcomes as measured by patient perception and will create a much more
personal approach to health care delivery. Dr. Rigbert indicated that for the past three
years under a waiver from HCFA, the medical directors of Medicare plans in Arizona have
been meeting every four to six weeks to establish a program which is apt to become a
paradigm for the nation.
Dr. Rigbert confirmed Ms. Yarbroughls observation that disease- oriented critical paths
were being standardized across health plans, adding this has been accomplished based
upon the health plans' own data along with a patient complement. Dr. Rigbert confirmed
this information will become available when standardized and it will be in a format
decipherable by lay people.
October 1,1996
Page 8
STUDY COMMITTEE ON HEALTH
CARE QUALITY - SUBCOMMITTEE # 1
Chairman GrosJean announced the next meeting will be held October 15, 1996 at 10: OO
a. m. in House Hearing Room 3.
Without objection, the meeting was adjourned at 11 : 45 a. m.
Respectfully submitted,
Alice Kloppel,
Committee Secretary
( Tape and attachments on file in the Office of the Senate Secretary)
ARIZONA HOUSE OF REPRESENTATIVES
Guests Attending Meeting
MEETINGT~,,~ i i'< r; r e,\ u4y < oe. nrn, it~ e or &\$ ~ 0 . Ll A I ~ D A T ED L+. \ 49b
I
NAME AND TITLE ( Please print) REPRESENT INC BILL NO.
ATTACHMENT -
ARIZONA STATE LEGISLATURE
JOINT INTERIM STUDY COMMITTEE
ON HEALTH CARE QUALITY
Subcommittee # I
NOTICE TO MEMBERS:
THE OCTOBER 29, 1996 MEETING OF SUBCOMMITTEE # I,
INITIALLY SCHEDULED IN THE OVERALL PLAN FOR THE STUDY
COMMITTEE ON HEALTH CARE QUALITY, WILL NOT BE
CONVENED.
MEMBERS:
Mr. Henry Grosjean, Chairman
Dr. Robert Dunn
Representative Susan Gerard
Ms. Constance Harmsen
Mr. Greg Harris
Representative Herschella Horton
Mr. Brian McNeil
Ms. Barbara Sutton
Ms. Mary Yarbrough
ARIZONA STATE LEGISLATURE
Forty- second Legislature - Second Regular Session
JOINT INTERIM STUDY COMMITTEE ON
HEALTH CARE QUALITY
Subcommittee # 2
Minutes of Interim Meeting
Tuesday, September 1 7, 1996
House Hearing Room 3 - 1 : 00 p. m.
( Tape 1 , Side A)
The meeting was called to order at 1 : 06 p. m. by Chairman Anne McNarnara and attendance was
noted by the secretary.
Members PreseM
Sandra A. Abalos, CPA, Abalos & Associates
Steve Barclay, Arizona Association of Health Maintenance Organizations
Dr. Arlan Fuhr, Vice President, Arizona Association of Chiropractic
Representative Sue Grace
Senator Mary Hartley
Representative Paul Mortensen
Representative Andy Nichols
Anne McNarnara, Ph. D., representing Registered Nurses, Chairman
Members Absent
None
Speakers Present
Kathy Boyle, Executive Director, Arizona Pharmacy Association, Tempe
Jim Drake, Banking and Insurance Analyst, House of Representatives
Chairman McNamara noted that she was elected to chair Subcommittee # 2 at the orientation mccring.
She reviewed the Subcommittee's charge to study direct patient access and point of service options
( see Attachment I ) . An excerpt from a National Conference of State Legislatures ( NCSL) 1994
publication on maternal and child health legislation was made available ( Attachment 2). together with
background information on stand- alone point- of service products ( Attachment 3).
Mr Barclay distributed an American Association of Health Plans direct access char1 ( Attachment 4),
and reviewed a staff guide entitled " A hrref .~. trrnrnarycf Heulfh ln. s~~ rancl. e~ ~, yw/ u/ rorrrr lA r~ zontr
IYYf- IYY6" ( Attachment 5, filed in Office of Chief Clerk) He commented on those licensed entitles
overseen by the Arizona Department of Insurance ( DOI) and noted the three different categories
under Title XX.
1 Insurers ( noting that in Arizona health insurance is known as disability insurance)
2. HMOs ( Health Care Services organizations)
3. Hospital, medical, optometric and dental service corporations ( i. e. 13luc Cross)
Mr Barclay reviewed significant statutes, including mandated benefits and disclosure fol- nis In regard
to coverage, and compared S. B. 1 109. accountable health plans ( Laws of 1993, Chapter 23 I ) w~ th
the federal KennedyKassebaum bill. He noted that all group provisions include guaranteed renew-ability,
restrictions on the use of pre- existing conditions and portability of coverage.
Responding to a query by Dr. Fuhr, Mr. Barclay pointed out that although there is no mandate to
disclose specialists as there is for primary care physicians, most organizations do so.
Dr Fuhr asked which providers are covered by S. B. 1 109. Mr. Barclay explained that all hough all
preexisting conditions were originally wiped, most were later reincorporated, with the exception of
the mandate to cover certain providers, including chiropractors.
Chainnan McNamara responded to questions and pointed out that the Committee's output could take
many forms.
Mrs. Grace requested information in regard to the direct access chart ( Attachment 4). Dr Fuhr said
he is aware that Maine began about one year ago. Mr. Barclay noted that many states allow direct
acccss to obstetricianlgynecologists ( OBIGYNs), and hrther discussion ensued.
Mrs Grace remarked that one law does not fit all fifty states
Jim Drake, Banking and Insurance Analyst, House of Representatives, offered to obtain lurthcr
information on the Maine experience.
Chairman McNarnara observed that Minnesota is also very prominent in the managed care lieltl. and
shc proposed that as much information as possible be assembled on other states' expericnccs
,,'
Mr. Rarclay noted that the Arizona law contains a specific nondiscrimination mandate that , + p p k s
onlv to Health Care Services organizations
Chairman McNamara asked if definitions for " point of service" and " direct acccss" are needed. Mr
Barcia" opined that while " direct access" is easily understood. " point of service" could hc clarified
Dr. Fuhr pointed out that chiropractors have fought to be qualified as licensed physicians for many
years, and said he believes clarification is needed.
Chairman McNamara confirmed that definitions will be evaluated at the next meeting.
Mrs. Grace proposed a review of obstacles that prevent access to specialties, and roadblocks to
preventative health care. She suggested soliciting input from employers on how decisions are made.
Ms Abalos pointed out that the decision is largely cost- driven, with benefits structure considered
second. She observed that small business owners have been forced to enter into preferred provider
organization ( PPO) networks, premiums increase every six months, and lack of portability is a
significant problem.
Mr. Barclay said while he believes people should have a choice of products, employer provided
coverage is down to approximately seventy percent nationwide, and increasing numbers of
dependents are losing coverage. He added that there have been no premium increases over the past
couple of years
Kathy Boyle, Executive Director, Arizona Pharmacy Association, Tempe, stressed the importance
of access to pharmacy services and noted a change in focus toward dispensing information as well
as services. She called attention to what she described as an alarming trend toward a requirerl~ cnt that
patients use mail order prescriptions as a cost saving measure, and said she believes patients should
have direct access to a pharmacist. Ms. Boyle pointed out that Arizona's hot summers create a
problem when drugs are delivered to mail boxes.
Mr. Barclay said it is his understanding that options are provided for, and he located and cited the
relevant statute which states that an organization cannot require mail order service drugs cxclusivelv
I4e pointed out that pharmacy is not a mandated benefit for employers.
Dr. Fuhr asked to see a study on the savings involved with mail order drugs
Chairman McNamara reviewed the agenda for the next meeting, to include definitions. an update
from Maine and Minnesota, and information on employer satisfaction based on factors other than
cost.
Mrs. Grace requested information on savings realized by use of preventative services, the number of
people covered, and dealing with long term care.
( Tape I , Side 13)
Mr. Barclay offered to locate speakers for the next meeting.
Chairnian McNamara solicited credible wellness data
Ms. rlbalos offered to report on any available small business community studies.
Dr. Nichols pointed out that long term care and assisted living facilities are becoming increasingly
important.
Chairman McNamara announced that the next meeting of Subcommittee # 2 is scheduled for
October I, 1996 at I p. m.
Without objection, the meeting adjourned at 2: 1 I p. m.
? r / 4; Lk / f L L u
Carole Price, Committee Secretary
( Orignal minutes with attachment and tape on file in the Office of the Chief Clerk. Copy of minutes
on file with the Secretary of the Senate.)
ARIZONA HOUSE OF REPRESENTATIVES
Forty- second Legislature - Second Regular Session
JOINT INTERIM STUDY COMMI'ITEE ON
HEALTH CARE QUALITY
SUBCOMMI'ITEE # 2
Minutes of Meeting
Tuesday, October 1, 1996
House Hearing Room 3 - 1 : 00 p. m.
TAPE 1, SIDE A
Chairman McNarnara called the meeting to order at 1 : 05 p. m. and the attendance was noted.
Steve Barclay
Dr. Arlan Fuhr
Senator Mary Hartley
Representative Sue Grace
Representative Paul Mortensen
Anne McNamara, Chair
Sandra Abalos Representative Andy Nichols ( excused)
Jack Towsley, Chief Executive Officer, United Health Care of Arizona ( UHC)
Dr. Jay Mayes, Vice President, Medical Affairs, Health Partners Health Plans
Dr. Leonard Rudnick, Chiropractic Physician, representing himself, Tucson
- .
Chairman McNamara asked if there were any changes or additions to the September 17, 1996
minutes ( Attachment 1). Mr. Barclay noted the following changes:
Page 2, second to last paragraph should read: " Mr. Barclay noted that the Arizona law
contains a specific nondiscrimination mandate that does not apply to Health Care
Organizations ( HMOs)."
Page 3, fifth paragraph, last sentence should read: " He added that there have been no
premium increases over the past couple of years in the HMO market in Arizona."
J O M INTERIM STUDY COMMITTEE ON
HEALTH CARE QUALITY ( Subcornrnince # 2)
10/ 1196
Mr. Barclay moved, seconded by Dr. Fuhr, that the minutes of September 17,
1996 as corrected be adopted. The motion carried.
Chairman McNamara referred Members to the September 25, 1996 memorandum from Jim Drake,
Majority Research Analyst, relating to definitions of " direct access" and " pointsf- service"
( Attachment 2). For the benefit of the public, she read each definition and asked for comments fiom
Members.
Pointsf- Service:
Mr. Barclay stated his belief that the reference to " managed care association" is an
inappropriate and misleading term. He recommended that language be changed to " managed
care plan" or " managed care company." In addition, he proposed to append the following
to the definition: " the person could receive services outside of the provider network typically
at higher coinsurance and deductible levels."
McNamara asked if there is a definition for company or plan. Mr. Barclay responded that
the terms are not defined. He noted that most people understand managed care but suggested
that perhaps the definition could include " use definition of managed care."
Chairman McNamara solicited comments fiom the public on the defmition. No public
participation was forthcoming.
Mr. Mortensen moved, seconded by Mrs. Grace, that the definition as amended
be presented to the Joint Interim Study Committee on Health Care Quality.
The motion carried.
Direct Access:
Mr. Barclay requested that the reference to " managed care association" be amended to read
" managed care company." Mr. Barclay recommended that after " penalty," insert " to all or
selected specialists." He said that this~ willallowf or both of the direct access products to be
considered.
Dr. Fuhr questioned whether reference to selected specialists limits the company again back
to almost controlling direct access. He stated that some obstacles are that one would have
to be on the panel of the company, and that the utilization criteria of the company is
unknown.
Chairman McNamara asked Dr. Fuhr to provide a recommendation. Dr. Fuhr deferred
making any recommendation until he has time to work on a suitable definition.
Mr. Barclay noted that these are simply definitions for purposes of discussion. He
maintained that if the definition is changed to require someone to go to any specialist in order
I O N INTERIM STUDY COMMITEE ON
HEALTH CARE QUALITY ( Subcornminu I21
10/ 1/ 96
for it to be called a direct access product, a lot of good products will be cut out of the market
that are helping address the issue of going through the gatekeeper.
Chairman McNamara recommended changing " enrollee's" to " provider's."
Chairman McNamara announced that the discussion of the definition of " Direct Access" will
be deferred to the next meeting pending further work.
Chairman McNamara referred to handouts distributed to Members on Minnesota where point of
service options were put into statute ( Attachment 3); and Maine's legislation relating to chiropractic
care ( Attachment 4), and basic health care needs of women ( Attachment 5).
Representative Grace noted that Minnesota has the most advanced HMO system in the country;
however, she pointed out that one has to look at other states' legislation in the context other states
are working under. She questioned how extensive Maine's HMO system is. Dr. Fuhr advised that
Maine is small in managed care compared to Minnesota.
Representative Grace commented that it would be good to look at other states' models of managed
care that have experience in the area. She maintained that Arizona is very different in managed care
compared to other states.
Mr. Barclay concurred with Representative Grace. He stated that review of other states' statutes
should consider the regulatory fiamework in place which may be different from state to state. He
pointed out that Arizona has an extra regulatory barrier that other states may not have. Under
Arizona's licensing laws, an HMO is not permitted under its own license to offer a point of service
plan; it must partner up with an indemnity insurer. He said that somethmg can be gleaned h m other
states but the question is how it fits Arizona's circumstances.
Chairman McNamara suggested using Minnesota's legislation for purposes of background
infoxmation. She asked staff to get more data fiom other states and to note the differences that exist
within those states. -
Representative Grace recommended that study be limited to the subjects of direct access and point
of service which have been addressed here.
Representative Mortensen stated that there might be a tendency to drift if too much material is
presented. He opined that the Committee should stay with the topics being discussed: point of
service and direct access.
Chairman McNamara asked Members how they would like to proceed. The consensus was to limit
the topic to the two issues being considered here.
Chairman McNamara stated that specific information will be requested fiom Minnesota for
background information. She asked whether other states would be sources of information. Mr.
JOINT INTERIM STUDY COMMITTEE ON
HEALTH CARE QUALllY ( Subcommittee 112)
10/ 1/ 96
Barclay said he is skeptical about how much valuable information can be obtained fiom other states
because every state tends to look at things a bit differently. He said that Arizona is ahead of other
states in terms of the managed care market place. He stated that the charts indicate that the pattern
is clearly on the direct access side to not make it direct access to all specialties but rather to selected
specialities.
PRESENTATIONS
Jack Towslev. C hlef ExecutlveUHCL testified that his
company has been doing business in Arizona since 1985. UHC is under the umbrella of United
Health Care Corporation. He advised that UHC is a for- profit corporation, and has 40 million
enrollees nationwide in a variety of health care products. Enrollment in Arizona totals 140,000:
17,000 in HMO products, 62,000 in point- of- service, and 75,000 in PPO and indemnity- type
products.
Mr. Towsley said that United Health Care Corporation has had a history of direct access or open
access- type products since 1982, and currently serves over 2 million members with open access type
HMO products. United Health Care has a variety of ways how it defines open access: the type of
specialists it includes and the types of referrals or mechanisms to have particular types of treatment.
Mr. Towsley stated that in Arizona, UHC offers different plans but has found that the market is
asking for direct access to all participating physicians. Based on research and what the participating
and prospective customers have requested, UHC launched its open access HMO product in Arizona
about sixty days ago. UHC offers two plans: ( 1) an open access HMO where a member is limited
to stay within a panel of participating providers or contracted physicians, and ( 2) a point of service
type product. In Arizona, UHC has defined open access as two physicians, M. D. s and D. O. s, who
are participating under contract with the company.
Relating to point of service, Mr. Towsley said that it is a product that is very healthy for UHC and
one that it offers as an option. He said that UHC continues to offer a wide variety of other products
to provide choice to the market.
Dr. Fuhr questioned the availability of physicians in allied health. Mr. Towsley replied that under
the HMOs, UHC has services for ancillary providers to be referred through one of the participating
physicians, but does not have direct access. Dr. Fuhr asserted that UHC's open access is really not
open access. Mr. Towsley said it depends on how open access is defined.
Dr. Fuhr asked whether UHC has data to support the statement that it costs more to have the allied
professions included. Mr. Towsley said he will have to check to see if that information is proprietary
to the company.
Chairman McNamara mentioned that she knows many people who choose to use somebody other
than an M. D. or a D. O. as their primary provider. She asked if the company has done research on
utilization. or has cost data that could be helpful to the Committee. Mr. Towsley replied that D. C. s
JOINT INTERIM STUDY COMMITTEE ON
HEALTH CARE QUALITY ( Subcommitte U2)
10/ 1/ 96
are available under the company's indemnity- type programs. Experience has shown that in terms
of cost in an open access type program, cost effectiveness is maintained by limiting to M. D. s and
D. 0. s.
Dr. Fuhr asked if the company has chiropractic panels in any other states under HMO products. Mr.
Towsley replied in the affirmative. Dr. Fuhr asked for data on what states have chiropractic panels.
He said he would like to know if there is history someplace else.
Mr. Barclay asked Mr. Towsley if there is a large migration from the more traditional products and
more traditional HMO- designed primary care gatekeeper products to the new point of service and
open access products being offered in Arizona. Mr. Towsley replied that with only 68 days of
experience in the new service, there is no history yet.
Mr. Barclay asked for further comments on the issue of limiting open access to M. D. s and D. 0. s.
He said he understands one of the fundamental principles of the way HMOs operate is that coverage
comes down to a question of having a medical professional make a determination of medical
necessity. He asked if that is the determining factor in the design of the product. Mr. Towsley
answered in the affirmative. He stated that in order for the program to be successfid, medical
necessity determinations are left to the participating physicians.
Dr. Fuhr asked whether a patient who is not happy is allowed to go, under his own referral, to a
specialist who is on the panel. Mr. Towsley responded that the specialist would be referred through
the gatekeeper. He declared that all patients are allowed to change gatekeepers if they are not
satisfied with the results.
Representative Grace commended staff on the material prepared on health insurance changes since
1990. She raised the question of legislative change dealing with fairness and applying the standards
across the board, and said she will look up the statute to see whether it applies to the above situation.
Mr. Barclay also applauded staff on putting together the material. He remarked that an interesting
point is that employer acceptance may be an obstacle to the notion that a nongatekeeper HMO work
in a cost- effective manner. -.
Dr. Fuhr declared that even though it is a changing marketplace, the evidence is that there is still bias
for people in his profession: D. C. s, 0. D. s and psychologists. He asked if there are plans to consider
the allied profession in UHC's plans in Arizona. Mr. Towsley remarked that UHC currently offers
a wide variety of allied professionals within its plans in Arizona. He said UHC is constantly
investigating and evaluating what the consumer demand is, as well as how to use its cost- effective
tools.
In answer to Dr. Fuhr, Mr. Towsley replied that prior- authorization plans are available that HMO
clients can purchase separately which allow for visits to a chiropractor. He said he believes there
are 10 chiropractors in the network for the city of Phoenix.
JOMT INTERIM STUDY COMMITTEE ON
HEALTH CARE QUALITY ( Subcommittee I2)
loll196
Dr. testif ied that the
company has a membership of about 380,000. About 85 percent of its members are in the HMO
product in the tiered access or direct access model. Health Partners Health Plans's model is direct
access to physicians primarily. There is a service model which does include direct access to doctors
of chiropractic. On the HMO model, there is direct access for chiropractic, vision benefits, mental
health, etc., depending on whether employers choose to purchase those options. The physician
network totals about 2,000. As a provider- owned and sponsored health plan, one of the things that
is important is that the physicians helped design the products.
TAPE 1, SIDE B
Dr. Mayes revealed that the tiered access model is about four to six percent more expensive than a
tightly- controlled gatekeeper- physician model.
Dr. Mayes stated. that Health Care Health Plans is the fastest growing health plan in Arizona. Much
of that is because of choice. The tiered access model allows a higher level of choice in that members
can make more decisions about their personal health care. Although the tiered access model affords
more choice, not all physician specialities are immediately available.
In response to Dr. Fuhr who pointed out that direct access leaves out the allied profession. Dr.
Mayes answered that D. C. s are directly accessible under the service plan He stated that Health Care
Health Plans has contracted with Landmark Chiropractic Network which has a network of about 100
chiropractors. He said he is not sure of the number in Arizona. Dr. Fuhr asked for utilization
numbers, as related to Doctors of Chiropractic specifically.
In response to Chairman McNamara, Dr. Mayes related that if individuals are using services which,
determined retrospectively, could have been taken care of in a different way, it becomes an out- of-pocket
expense for the physician, not the member.
Mr. Barclay cautioned against the use of utilization data. In looking at such data, concern should
be what is it being compared to. He asserted that a point of reference is needed, and said that
utilization data is not meaningful unless it compared to something else.
Dr. Mayes stated that point of service means that a member can access anyone who is on the
network. Members, at their own cost, can go outside of the network if they choose. He said going
outside of network is increasingly not the choice because of cost.
Dr. J .& R u m r a c t i c P h v s l c l a n . Tucson,
. .
testified that in 1992,
he was one of three chiropractic physicians approached by Intergroup. He said he went through the
application process and a very thorough credential process. He became a part of a program called
Interflex in August 1992. Since that time, he said he has had no patients; he has never had a referral
in four years. He stated that he has consulted with other chiropractors and they have had no referrals.
JOINT INTERIM STUDY COMMITTEE ON
HEALTH CARE QUALITY ( Subcommittee # 2)
10/ 1/ 96
Representative Grace asked whether there is data available, other than fiom other chiropractors, that
no referrals have been made. Dr. Rudnick replied in the negative. Representative Grace asserted
that the Committee needs to work from factual data. She said it might be helpful for Dr. Rudnick
to construct his own data based on how many patients he has and how many of them are in HMOs.
Mr. Barclay observed that there has been a breakdown of some of the barriers to include
chiropractors in health plans on a voluntary basis. He asked Dr. Rudnick if chiropractors should be
classified as primary care physicians. Dr. Rudnick stated that he has personally referred patients
back to the primary care physician. He said he has acted as a primary care physician.
Mr. Barclay mentioned the debate that has been going on relating to what chiropractors can and
cannot treat. He asserted that some chiropractors need to know their limitations as treating
providers. Dr. Rudnick said that he would compare the education of D. C. s with any primary care
physicians that have graduated in the past five years.
Dr. Fuhr maintained that the chiropractors of today are not treating out of the scope of their practice.
Representative Mortensen asked if Dr. Rudnick ever confronted Intergroup about the lack of
referrals. Dr. Rudnick advised that the response he was given was that " they were working on it."
He noted the prejudice and reluctance of primary care physicians to refer patients.
Mr. Barclay said he will try to get some data on one program he is aware of that offers chiropractic
without a mandate on their HMO products.
Dr. Fuhr referred to the distributed package of material which will be discussed at the next meeting
( Attachment 6). He said it is an overview of the gatekeeper and how it is changing.
Mr. Barclay agreed with Dr. Fuhr that lines of communication need to be improved. He also
distributed material that might be helpful: National Governors' Association's Policy " Managed Care
and Health Care Reform" ( Attachment 7), American Association of Health Plans " Consumers with
a Choice Among Health Plans Are Choosing: Network- Based Plans " ( Attachment 8), and a letter
fiom State Fund Claims Administration to sen& President John Greene dated August 3, 1995
( Attachment 9).
Without objection, the meeting adjourned at 255 p. m.
9 a n n e ~ el1, pbrnmitteeS ecretary
( Attachments and tape on file in the Office of the Chief Clerk.)
JOINT INTERIM SlllDY COMMImE ON
HEALTH CARE QUALITY ( Subcommiaec # 2)
1011196
ARIZONA STATE LEGISLATURE
Forty- second Legislature - Second Regular Session
JOINT INTERIM STUDY COMMTITEE ON
HEALTH CARE QUALITY
Subcommittee # 2
Minutes of Meeting
Tuesday, October 15, 1996
House Hearing Room 3 - 1 : 00 p. m.
( Tape 1, Side A)
The meeting was called to order at 1 : 05 p. m. by Chairman McNarnara and attendance was noted by
the secretary.
Members Present
Senator Hartley
Representative Grace
Representative Mortensen
Representative Nichols
Dr. Arlan Fuhr
Ms. Sandra Abalos
Mr. Steve Barclay
Ms. Anne McNamara, R. N., Chairman
S~ eakerPs resent
Anthony Ballew, Family Nurse Practitioner; President, Arizona Nurse Practitioner Council, Mesa
John Grubka, representing himself, M esa
A1 D' Appollonio, Physical Therapist
The Members introduced themselves.
ADD~ OofV M~ in~ ut es
Chairman McNamara suggested that the following change be made in the minutes of October 1,
1996:
Page 3, second indented paragraph should read: " Chairman McNarnara
recommended changing " physician" to " provider."
Dr. Fuhr moved, seconded by Ms. Abalos, that the minutes of October 1, 1996
be approved. The motion carried.
JOINT INTERIM STUDY COMMITTEE
ON HEALTH CARE QUALITY - SUBC. # 2
OCTOBER 15, 1996
Discussion of Meta- Analvsis of Studies of Nurses in Prima? Care Rolls
Chairman McNamara noted that the Members should have received information entitled, " Nurse
Practitioners and Certified Nurse- Midwives A Meta- Analysis of Studes on Nurses in Primary Care
Roles ( Attachment 1).
Anthony Ballew, Family Nurse Practitioner; President, Arizona Nurse Practitioner Council, Mesa,
testified that his main concern with managed care is access to nurse practitioners as providers. He
related that 25 years ago people did not know what a nurse practitioner was but that has changed.
He now has an office, and a phys~ cians tops by and consults with him a half day each week. If he has
a problem beyond his experience or expertise, he sends patients to the physician. He expressed
hstration because he has had to change practices twice in the past few years due to problems
encountered regarding payment fiom previous employers. When this happens, his patients do not
have access to his services. He added that managed care organizations will not list nurse practitioners
or physician assistants as providers, not even under the Primary Care Physician ( PCP) despite
repeated requests. 1 I
He submitted that good quality care is being provided as nurse practitioners work in collaboration
with physicians. The Meta- Analysis contains statistics, and emergency room physicians in Mesa
appear to be pleased with nurse practitioners and physician assistants working in the emergency room
and in the community. He related the fact that if he calls the emergency room in the middle of the
night, he has no problem being recognized as a professional; however, he cannot see the patient in
the hospital because he does not have hospital privileges.
Refemng to utilization and cost effectiveness, Mr. Ballew noted that the Meta- Analysis states that
nurse practitioners and physician assistants spend more time with patients than doctors. He agreed
with that findmg. He conveyed that in 1975 he saw three to four patients in an hour. Today he needs
to see six or seven patients an hour in order to generate enough income to support the doctor's
practice ( pay staff, draw blood, overhead expenses, etc.). Once a physician realizes the utility of
nurse practitioners and physician assistants, two, perhaps three, are hired, depending on
circumstances, and it becomes cost- effective.
He concluded by refemng to a " fight" with the Mesa School District about athletic physicals. The
rules have been changed to allow nurse practitioners and physician assistants to give athletic
physicals. The school district decided that it was not allowable but eventually changed its stand.
Now it has discovered that their physical exams are more thorough; some patients have been
disqualified from athletics, upsetting some of the coaches. The doctors never disqualified anybody.
Mr. Barclay asked ifthe use of hospital privileges by nurse practitioners and physician assistants has
been discussed with the Hospital Association. Mr. Ballew answered that there is a working group.
The hospital and health care association are working on it. The process is ongoing but slow.
JOINT INTERIM STUDY COMMITTEE
ON HEALTH CARE QUALITY - SUBC. # 2
OCTOBER IS. 1996
.
Discussion of Revised Definitions
Chairman McNamara referred to the October 9, 1996 memo fiom Jim Drake, Majority Research
Analyst ( Attachment 2). She noted that the Members have agreed on the " point- of- service"
definition so discussion today will focus on " direct access."
Mr. Barclay submitted that both are good definitions for a point of reference. Dr. Fuhr commented
that he was unable to find a better " direct access" definition.
Mr. Barclay moved, seconded by Senator Hartley, that the definitions be
accepted by the Committee. Tbe motion carried.
Discussion of Enabling Lemslation fiom Mi~ esota
Chainnan McNamara explained that the Subcommittee, at the last meeting, reviewed legislation fiom
the states of Maine and Minnesota. The Members decided that the activity of managed care in
Minnesota is, percentagewise, more like Arizona. Additional information was requested & om staff
regarding legislation passed in Minnesota in 1995 relating to point- of- service ( POS) options. A
document was distriiuted to the Members before the meeting which addresses supplemental benefits
available to HMO members in Minnesota ( Attachment 3).
Mr. Drake stated that the State of Minnesota is very progressive in terms of managed care but this
is one of those cases in which legislation enacted in another state is not workable in Arizona. He
explained that POS beneh are d a d to as supplemental benefits in Minnesota. Minnesota HMOs
are allowed to offer POS options and do assume some insurance risk. There are a variety of
heightened financial requirements and hoops to jump through in order to offer these options.
Whereas, Arizona's Department of Insurance ( ADOI) prohibits Health Care Services Organizations
( HCSOs) fiom engaging in this practice.
Mr. Barclay expressed his appreciation of Mr. Drake's research. He added that many HMOs are
federally qualified, i. e., licensed and regulated by the United States Department of Health and Human
Services. Federal law also limits the ability to offer POS- type products, and there is a restriction
requiring that 10 percent of utilization be out of network ( otherwise, the organization resembles an
insurance company rather than an HMO). In Arizona, because of the Insurance Department's rule
being even more restrictive, it is a moot issue. However, if that is changed, federal laws would still
apply in some cases.
Dr. Fuhr asked how many HMOs are federalIy qualified. Mr. Barclay estimated that at least half are
federally qualified. He added that it is not quite the seal of approval it used to be because that has
been supplanted with accreditation rules.
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Testimonv from Guest S~ eakers
John Gmbka, representing himself, Mesa, stated that he has been a member of an HMO- type
organization for about 15 years. Until 1986, he and his wife were residents of California and pleased
with their health care plan ( Kaiser) . Before moving to Arizona, he attempted to find other areas to
live where similar- type care is offered but was unsuccess~ l. He is disabled, with a mental disability
for manic depression, and a provider could not be found because of preexisting conditions. His wife
accepted a job with the State of Arizona. He opted for Intergroup because it was offered by the state,
then he moved into Senior Care High Option.
He said it has been two years since he has been on Intergroup which has contracts with different
providers. He would get comfortable with a psychiatrist or psychologist, and suddenly, he/ she would
no longer be a member of the plan. He said it has been difEcult but it has been a good group for him.
He has reached the maximum of care with his PCP, who has sent him to a neurologist, psychiatrist,
psychologist, orthopedic specialist, etc.
Mr. Grubka submitted that it was not until he was offered the opportunity to access chiropractic
d c e s three times a week that he actually obtained relief for his physical pain which means that he
no longer has to take numerous medications which make him drowsy and prohibit him fiom driving.
He said he did not believe in chiropractic medicine until he used the service but 25 chiropractic visits
over the last two years have helped him. He added that he had expected a quicker change but he does
have degeneration of the spine and other problems.
He stated that the chiropractic counselor has been vev helpfbl but he will have to start paying him
out of his own pocket because he has used up his allotted visits. However, he continued, he has
experienced better results & om this c o d o r than firom changing medications suggested by different
psychologists and psychiatrists. He stated that his PCP is planning to retire in ten years. At this
point, he is very comfortable with the PCP and the chiropractic services. He stated that a physical
therapist wrote a five- page report which was referred to his PCP but his PCP said he has already done
everything the physical therapist recommended and will not refer him to her. The PCP said if he
wants that kind of service, he will have to pay for it himself
He clarified for Mr. Barclay that he is Medicare eligible and is on Senior Care High Option which
offers gymnastic fkdities but it is limited in terms of who is authorized to provide those services. He
lives in East Mesa and the facilities are not nearby.
Mr. Barclay pointed out that since Mr. Grubka is Medicare eligible, there is a grievance process
through the Health Care Financing Administration ( HCFA) to handle complaints and problems. Mr.
Grubka answered that he has just become aware of that but he has a fear of being dropped as a
subscriber. Mr. Barclay stated that he has rights and protections under the law to pursue these
matters and encouraged him to do so.
Mr. Grubka said he has gone outside Intergroup for trigger point injections suggested by an osteopath
who is no longer in private practice. He went to his PCP who said he does not believe in the
J O N INTERIM STUDY COMMITTEE
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OCTOBER 15,1996
injections. His current chiropractor is recommending intervention with injection of steroids, and
Intergroup is refbsing to pay for that so he will have to pay for it himself, and it can be expensive.
Mr. Grubka interjected the fact that he did apply to CIGNA and several other plans before his wife
obtained state employment but he was not accepted because of preexisting conditions. He said he
is glad that she was able to obtain a state job and he could get into the plan.
A1 D'Appollonio, Physical Therapist, referred to the " direct access" definition which states that
patients would have access to specialists without going through primary care, and asked how
" specialist" is defined. Chairman McNamara answered that " specialist" has not been defined, adding
that testimony was taken at the last meeting fiom two difBent health plan representatives who shared
their definitions; however, the definitions were not the same.
Mr. Barclay indicated that Mr. Appollonio's question points out a concern that people will perceive
the definitions as something other than points of reference for the Members. He pointed out that no
insurer is mandated to offer a direct access or POS product. He indicated that testimony was given
last week that there is not even direct access to all M. D. s and D. 0. s. He said he thought that one of
the speakers testified that referral decisions for ancillary services ( lab work, x- rays, chiropractic or
physical therapy, etc.) need to be fbmelled through M. D. s or D. 0. s.
Mr. D'AppoIlonio testified that in Arizona physical therapists are licensed to see, evaluate, and treat
patients without a referral; however most insurance companies require a physician's referral. He
contended that this does not make sense. When legislation was passed in 1982, the whole concept
was to give the consumer the ultimate choice and reduce health care benefit costs, with the logical
assumption that someone with back pain can go to a physical therapist without seeing a physician
first. However, that is not the way it is. He remarked that it only increases the cost when a patient
goes to a physician who refers himher to a physical therapist, and he does not perceive this as direct
access. He contended that cost containment is possible without preauthorization of treatment. He
said his philosophy and treatment will differ from that of a D. O., M. D., or a chiropractor, and if an
insurance product is going to offer physical therapy services, there should be access to that service
without going through hoops.
Dr. Fuhr said he relates to Mr. D'Appollonio's testimony. Chiropractors fought for direct access
and insurance equality for 25 years, and attained that. Along came the HMOs, and the access right
was lost. He said recent data entitled, " Cost Effectiveness of Chiropractic Care in a Managed Care
Setting" ( Attachment 4) shows that direct access to chiropractic care costs about half the price of
conventional care. This is under a managed care setting with preauthorization. He added that
chiropractors refer patients to physical therapists many times because physical therapists perform
services that chiropractors do not. He encouraged the Members to read the document.
Discussion
Chairman McNamara asked the Members what they would like to take forward to the full Committee.
She noted that there will be one Subcommittee meeting before the full Committee meets.
JOINT INTERIM STUDY COMMITTEE
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Mr. Barclay stated that he has information on alternative medicine and how fieedom of choice is
finding its way into managed care. He also has an actual policy fiom a company ( not an HMO)
located in Salt Lake City which offers the country's only holistic- oriented managed care plan. He
spoke in favor of providing a variety of choices for the consumer. He remarked that this is a
competitive marketplace, and imovativeness and responsiveness are needed in order to keep
consumers happy. He said he believes that the marketplace will respond, and has, in a way to
maximh choices available to employers and employees, which is much more effective than enacting
legislation.
Dr. Fuhr submitted that he does not think the marketplace is moving that way at all because
employers are still controlling it. He noted that Dr. Rudnick testified at the pevious meeting that he
had been with Intergroup for four years, and even though chiropractic service is offered, it is not
being utilized. Dr. Fuhr contended that there must be some kind of accountability to the plans. He
said freedom of choice can be discussed but he still believes there is a direct access problem because
the nurse practitioner and physical therapist both said they are having a problem. He noted that the
chiropractic profession is certainly having problems with direct access, and once they receive direct
access, problems are encountered regadhg payments. He added that CIGNA is now paying S 13 for
an office call, and practitioners are dropping out of the plan because they cannot afford to take
patients. He stated that this is not the marketplace running correctly. People do not sign up for
holistic plans but what is offered by the employer from the large plans in Arizona.
Mr. Barclay explained that CIGNA has a contract with a national provider network ( PCMC) which
provides the panel of chiropractic pbcians in the state. He related the following statistics regarding
CIGNA's usage of chiropractic services fiom the period October 2, 1995 to February 29, 1996 in
Northern Arizona:
There were 4,426 chiropractic visits and 745 patients which averages out to 5.7 visits
per patient. Of the 745 patients, 392 x- rays were taken.
He said this is certainly different f? om the Intergroup experience. He commented that it is far beyond
the purview of the Subcommittee to address provider compensation issues as alluded to by Dr. Fuhr.
He said he does not know what CIGNA pays the chiropractors but he has been informed that it
receives one request per week f? om chiropractors interested in joining the network. He surmised that
if it was so bad, there would not be such interest. He reiterated the fact that the Subcommittee should
not discuss the issue of provider compensation, etc. He added that he believes the chiropractor who
testified several weeks ago did say things have changed with Intergroup, and he is starting to see a
glimmer of hope.
Dr. Fuhr, referring to PCMC, stated that the reason people are calling in is because they have not
been in the plan and do not know what they would get paid. He affirmed the fact that chiropractors
in Mesa, with about a year's experience, are averaging % 13 per office call and cannot afford to take
patients. He suggested that the Subcommittee owes it to the main Committee to make them aware
of what is happening.
JOINT MTERIM STUDY COMMITTEE
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OCTOBER IS, 19%
Ms. Abalos stated that she has survey results fiom the small business community regarding health care
coverage. The information is taken fiom a state ballot sent out every year by the National Federation
of Inde! pendent Business ( NFIB) to Arizona small business owners ( groups of employees fiom 3 to
40):
Small business owners believe that the responsibility for insurance purchasing
decisions should be borne equally by the employer and the employees.
In 1995,33 percent of the business owners responding said they offered coverage to
all of their employees. This does not mean the business owner was paying for the
coverage. Twenty- one percent said they offered coverage to some of their employees
( probably the business owner and not the rest of the staff).
In 1994,38 percent of the business owners said they actually paid for health coverage
for their employees.
Small business owners believe tax incentives should be given to encourage small
business owners to provide health insurance coverage.
Small business owners believe that hospitals and physicians should be required to
charge health insurance companies no more than what they would receive under
Medicare.
Over 86 percent said they do not want mandated health insurance coverage but
fieedom of choice. In that fieedom of choice, they would like to decide whether or .
not to provide coverage to employees and the ability to decline certain benefits.
Small business owners believe that the business marketplace or the consumer, not the
govenunent, should determine what is included in health insurance policies. Instead
of mandated coverages, perhaps there could be a provision for options so they could
choose and customize the insurance policy based on the employees' needs, cost
considerations, etc.
Mr. Barclay asked if there is a trend in terms of whether the employer cost of coverage is going down
or remaining stable. Ms. Abalos answered that she tried to make a determination but the question
was not asked consistently over the last five years so she was unable to obtain a sense for that. She
added that in 1990, 46 percent of the respondents said they provided employee health insurance.
Sixty percent of those who did not provide health insurance said it was too costly. As of 1995, 33
percent are providing for all employees; 20 percent for some.
Mr. Barclay advised the Members of a discussion in another meeting relating to notch group coverage
for people above the AHCCCS poverty line. He indicated that health care coverage is extremely
price driven in the small group market, and it is very tough for small employers in a voluntary
JOINT INTERIM STUDY COMMITTEE
ON HEALTH CARE QUALITY - SUBC. # 2
OCTOBER 15.19%
environment to continue to provide coverage. He advised the Committee to keep that in mind if
attempts are made to add any additional layers to coverage.
( Tape 1, Side B)
Chairman McNamara noted that the small employers do not want mandated benefits but do want the
option to decline certain benefits with the consumer making the decision as to what should be
included in health insurance policies. She asked ifthe consumer would be the employer. Ms. Abalos
replied that it would be a joint decision by the employer and employees.
Representative Grace asked Ms. W o s how many small business employers offer flexibility in health
care plans. Ms. Abalos replied that she does not know if the products that the small business
community are eligible for are very flexible. She surmised that the small business owner, in making
a decision, will first insure that the insurance product covers hidher own family to the degree that
they need or want; secondly, determine if it is acceptable to the employees; and thirdly, consider the
cost.
Chairman McNamara referred to POS and direct access. She asked if recommendations need to be
made from a small business perspective. Ms. Abalos conveyed a concern that if something is
mandated that would increase the cost of health insurance to the employer, it could hinder small
businesses h m providing insurance for the employees. She noted that if people have options, even
with POS, and it means they will bear an additional cost on their own, it is all right as long as that is
understood.
Ms. Abalos indicated that another health care survey has been sent out by NFIB. As soon as she
receives the results, she will share it with the group.
Chairman McNamara suggested that a position statement be prepared reflecting the discussion
concerning consumer choice and availability of senices but not necessarily recommending legislation,
to be presented to the hll Committee for decision making among the Legislators. Mr. Barclay said
it may be appropriate to have Mr. Drake prepare a draft for the Subcommittee to review.
Representative Grace agreed that this would be a good course to take. She sensed that the Members
are not comfortable with mandates and requested that Mr. Drake prepare a draft.
Chairman McNamara referred to the Kennedy Kassenbaum bill and asked the Members if they wish
to discuss its implications for the state.
Mr. Barclay said he believes it is being reviewed by Subcommittee $ 1, and ADO1 h& been reviewing
what needs to be done as a state in order to be in compliance in the next six months to one year. He
speculated that everyone agrees that the state plan should be customized to Arizona's needs. He said
the Kennedy Kassenbaum bill stipulates that if the state does not develop its own plan by a certain
date, federal regulations apply.
JOINT INTERIM STUDY COMMITTEE
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OCTOBER 15.19%
Ms. Abalos conveyed the fact that Medical Savings Accounts ( MSAs) are included in the Kennedy
Kassenbaurn bill. The accounts have been in existence in Arizona for several years but small business
employers have not taken advantage of them because of associated administrative costs, etc.
However, since there is now a federal product, and Arizona has a program in place, she said she is
curious to see how the health care industry will be affected and what choices the small business
owners will make.
She explained that these accounts provide a choice for the consumer. A medical savings account is
set up, and the employer could choose a health insurance plan with, for example, a $ 2,000 deductible
to reduce the cost of the insurance product substantially. That $ 2,000 per employee would be placed
into an MSA, and the employee could see a physician and pay out of that account for heatlh w e
needs. At the end of two years, if that money is not spent, it belongs to the employee. Discussion
followed concerning specifics of the program. Mr. Barclay stated that it might be feasible to
recommend enabling legislation allowing state- regulated HMOs to offer a high deductible product.
More discussion followed concerning policing of the program, and long- term care implications of the
bill.
Chairman McNamara asked if this discussion should be included in the position paper, and the
Members agreed that it should.
Public Testimony
There was no public testimony given.
( The following information was distributed to the Members & om Dr. Fuhr before the meeting: Letter
fiom Dr. Rudnick, Tucson Chiropractic Center, Inc. ( Attachment 5); Special Article Does Increased
Access to Primary Care Reduce Hospital Rehissiom? ( Attachment 6); Chiropractic Patients Are
More Satisfied with their Care ( Attachment 7); Health of the Public The Private- Sector Challenge
( Attachment 8); Special Communications Ihe Epmalng Scope of State Legzslation ( Attachment 9);
and Health Care Policy: A Clinical Approach Capitation or Decapitation - Keeping Your Head in
Changng Times ( Attachment 10).
Without objection, the meeting adjourned at 2: 25 p. m.
( Original minutes, attachments, and tape are on file in the Office of the Chief Clerk.)
JOINT INTERIM STUDY COMMITTEE
ON HEALTH CARE QUALITY - SUBC. # 2
OCTOBER 15, 1996
ARIZONA STATE 1, EGISLAI'URE RECEIVED
eUIrc ? I FRWY OcclnC
1- orty- second 1, egislature - Second Rcgular Session
NOV 8 1996
, JOINT INTEItIM S1' IJI) Y COMMITTEE
ON HEALTH CARE QUALITY
Subcommittee # 2
Minutes of Interim Meeting
. l'ucsday, October 29, 1996
Ilouse 1- learing Room 3 - 1.00 p. m. to 3: 00 p. m.
(' l'npc I . Side A)
' l'he meeting was called to order at 1 : 05 p. m. by Chairman McNamara and attcndancc \+) as notcd
by thc secrctary.
Menibers Present
Rcprcsentative Grace
I< cprcscntative Mortensen
Ms. Sandra Abalos
Mr. Stcvc Barclay
Arlan l: uhr. I1. C.
Ms. Anne McNamara, Chairman
Senator I lartley
Rcprcsentativc Nichols
Spcakcrs I'rcsent
. lim Ilrakc. Majority I< cscarch Analyst. I lousc oSI< cprcscntativcs
(' arol (' urc. Ikgistcred l. obbyist, representing (; olden Ilule Insurance Company
At thc rcqucst of C'liairman McNamara. the Subcomniittcc mcmbcrs briclly ilitroducctl
tllcllisclvcs.
Approval ol' Iblini~ tcs
Ilcprcscntativc Gracc moved that thc Subcommittcc niinutcs datcd
Octobcr 15, 1996 be approved as writtcn ( Attachmcnt 1). ' I'hc motion was
sccondcd by Mr. Mortcnsen.
' l'cstimon\! from ( jucst Speakers
. lim I) l. nkc. Majority I< cscarch Analyst. I louse ol'I< cprcscntativcs. ad\~ iscdt I i ; l r ('; ll. ol (' 111. c. \+ ot~ ltl
hc arriving at 1 : 30 p. m. to spcak about mcdical savings accounts ( MS, 4).
I > iscussion and Review of J'roposcd Subconimi ttcc Itcport
(' hairman McNamara explained that a prcliniinary suniniary rcport was dcvclopcd I>! MI.. I > l; lkc
( Atrachmcnt 2 ) based on deliberations in prcvious meetings. and mailcd to Comniittcc mcmhcrs
along with an invitation to niakc any dcsircd changes. Shc mentioned tliat she tool\ the Iihcrt!~ ol'
modilying the rcport cxtcnsivcly ( Attachmcnt 3). Sl~ cop cncd the floor to discussion on
h4r. 1) rakc's rcport.
MI.. I3arcla) said tliat given thc disparate vicws among Subcommittcc nicmbcrs. i t \ votrlci I,(%
dil'licult to reach any consensus on a singlc rcport. Given this, hc statcd his I'ccling hat
Mr. 1) rakc. s rcport capturcs the csscntial clcnicnts of previous discussions wllilc (' Iiai1.11i: ln
McNaniarn's rcport gocs into grcater dctail and niay hc considered inappropriate lhr blcndilig
purposcs.
(' 1i; lil- man McNaniara bricfcd Dr. 1: uhr. who arrivcd late. 011 thc actions of the Subcommittcc.
1\ 41.. I3al- cln! approved of the opcning paragraph under 1: indings in the " llrakc I< cpor~"
(. 4ttaclimcnt 2) and noted tliat the " McNamara Ilcport" ( Attaclimcnl 3) lacks similar I;~ ngu; igc
I Ic, suggested such disclaimcr language be included in tlic h4cNaniara Ilcporl bccil~ rsc ol' tlic
\ l: rstl! divcrgcnt vicws of thc Subcommittcc nic~ iibcrs.
I here was somc qucstion as to which rcport tlic Subcommittcc should work from. 1) r. 1; uIir
stated his prclcrcncc to work from the McNamara Rcport. ' l'hc consensus was to conduct a
~ r i -- parIagra p! i r c v i c ~ 01' tlic hlcNamara Ilcport .
(' li:~ irm: rn McNamara said tlic Ovcr\, ic\\ scction str~ tcstl ic purpose and ~ stablisli~ iicnotl' tlic
S~ lhcommitrcc. ' I'hcrc hcing no disagreement. the section cntitlcd Ovcrvic\ v \ vns no1 rnotfilictf
(' lx~ il- m:~ Mnc Na1ii: ira noted that tlic Mcmhcrship scction mcrcl! lists mcmbcrs. ' 1 I1~ 1. c. I , c.~ n:, n o
disagrccnicnt. this scction was not modilicd.
I lie Subcomliiittcc Socuscd on paragraphs 1 . 2 and 3 undcr tlic I'roccss scction. ' l'licrc king no
clisagl- ccnicnr. this lang~ lagew as not modilied.
1: ocusing on paragraph 4 undcr thc I'roccss scction. Chairman McNarnara cxplaincd that shc 11scti
thc contro\~ crsialt crni " specialist" with the understanding that i t would bc li~ rlhcrd isc~~ ssc~ cl.
1) s. I * ullr conI'Csscd that the tcrni " specialist" \+ as a major point ol'contcntion Ihr him.
(' II; III- I~ MI; Ic: N~ an~ arae xplained that paragraph 5 undcr thc I'roccss scclion lists t

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Joint Interim Study Committee -
. + Pq ! on Health Care Quality
.. 5
2 ..& . .. : , G" " j ..*; 7,,
.- k* :+. %, , : ., &.-* " FINAL REPORT . :,. (.. ,;. .. , , S L~.~~,?.:& ;.*,
.. 3. November 30, 1996
MEMBERS
Representative Sue Grace, Co- chairman
Constance Harmsen -, . >
Dr. Robert J. Dunn
Representative Susan Gerard
? ~ l i ; Heaschc~!! a H~ oit~ m ~ ~
Greg Harris
Henry Grosjean
Mary Yarbrough
Barbara Sutton
Representative Paul Mortensen
Steve Barclay
John NirnsLy
Dr. Barbara Amg
Senator John Kaitts, C- an
Representative Andy Nichols
Senator Mary Hartley
Anne M c N m
Dr. Arlan Fuhr
Sandra Abalos
Dr. John Cnkkshank
Senator Ann Day
Senator David Pettrscn
Senator Sandra Kennedy
Mary Leader
B& ara Keilkg
Marci HaQsickson
TABLE OF CONTENTS
. Page
I . AUTHORITY AND SCOPE OF DUTIES . . . . . . . . . . . . . . . . . 2
11 . COMMITTEE ACTIVITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
m . SUBCOMMITTEE REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . .6
IV . COMMITTEE RECOMMENDATIONS . . . . . . . . . . . . . . . . . . 11
V . COMMITTEE MINUTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
I. AUTHOFUTY AND SCOPE OF DUTIES
The Joint Interim Study Committee on Health Care Quality was created by the
cooperative efforts of both the Speaker of the k z o n a House of Representatives Mark
Killian, and the Arizona Senate President John Green. The Committee was charged with
studying the following areas:
1. The establishment of consistent quality measurement standards, licensing
requirements and solvency requirements for providers, including health care
services organizations, hospitals, physician hospital organizations, provider
service networks, preferred provider organizations, and provider senice
organizations;
2. The availability, affordability and quality of small group health insurance;
3. Direct patient access to licensed health care specialties;
4. Provider credentialing, contracting, and termination issues;
5. Point of service options;
6. Provider access to managed care networks;
7. Cost implications for patients and employers, and;
8. H. R. 3 103, The Health Insurance Portability and Accountability Act of 1996.
In an effort to ease the administrative burden of running a committee comprised of
twenty- six members, the cornminee chose to divide itself up in the following manner:
Subcommittee # 1
" establishment of consistent quality measurement standards, licensing requirements and
solvency requirements"
( H. R. 3 103, The Health Insurance Portability and Accountability Act of 1996)
Subcommittee Chair:
Mr. Henry Grosjean
Members:
Ms. Constance Harmsen
Dr. Robert J. Dunn
Representative Susan Gerard
Representative Herschella Horton
Mr. Greg Hanis
Mr. Henry Grosjean
Ms. Mary Yarbrough
Ms. Barbara Sutton, CLU, ChFC
Staff: Kitty Boots
Subcommittee # 2
" direct patient access and point of service options"
Subcommittee Chair:
Dr. Anne McNarnara
Members:
Representative Paul Mortensen
Mr. Steve Barclay
Representative Sue Grace
Representative Andy Nichols
Senator Man, Hartley
Dr. Anne McNamara
Dr. Arlan Fuhr
Ms. Sandra A. Abalos
Stafi Jim Drake
Subcommittee # 3
" provider credentialing, contracting and termination and provider access
to managed care networks"
Subcommittee Chair:
Dr. John M. Cruickshank. D. O.
Members:
Dr. John M. Cruickshank, D. O.
Representative Sue Grace
Senator Ann Day
Senator David Petersen
Senator Sandra Kennedy
Ms. Mary Leader ( later replaced by Mr. Brian McNeil)
Mr. John Nimsky
Ms. Barbara Keilberg
Ms. Barbara Aung, D. P. M.
Ms. Marci L. Hendrickson
Staff: Lisa Block
11. COMMITTEE ACTIVITY
The Joint Interim Study Committee on Health Care Quality met as a full committee on
September 1 1, 1996 and November 12, 1996. Subcommittee # 1 held hearings on
September 17, 1996 and October 1, 1996. Subcommittee # 2 and Subcommittee # 3 held
hearings on September 17, 1996, October 1, 1996, October 15, 1996 and October 29,
1996.
111. SUBCOMMITTEE REPORTS
Subcommittee # 2 elected to draft a written report on its activity, while Subcommittees
# 1 and # 3 chose to make oral presentations in the November 12, 1996 hearing ( see
Committee Minutes). The report fiom Subcommittee # 2 is included below in its
entirety.
Report from Subcommittee # 2 ( authored by: Dr. Anne McNamara)
Overview:
The Joint Interim Study Committee on Health Care Quality was established in response
to a Strike- Everydung Amendment to HB 222' 8 made in the House Banking and
Insurance Committee on February 13, 1996. The purpose of the legislative study
committee was to evaluate and make recommendations concerning the quality of health
care.
Based on the extensive charge of the Committee and the large number of Members
assigned to the committee, three subcommittees were formed. The charge to
Subcommittee 2 was " to study ' direct patient access ' and ' point of service options ' in
terms of their impact on availability, aafordability, and quality of small group health
insurance as well as cost implications for patients and employers.
Membership:
Subcommittee 2 consisted of eight members:
Sandra A. Abalos, CPA, Abalos & Associates ( representing small business)
Steve Barclay, AZ Association of Health Maintenance Organizations
Arlan Fuhr, DC ( representing AZ Association of Chiropractic)
Representative Sue Grace
Senator Mary Hartley
Representative Paul Mortensen
Representative Andy Nichols
Anne McNamara, RN, Ph. D, Chair. ( representing AZ Nurses' Association)
Process:
Subcommittee 2 met four times to address issues charged to the group. Due to varying
views and opinions of the Subcommittee members, the following report represents the
findings of the Subcommittee for which there was general agreement. The study process
used included: review of prior health insurance legislation ( 1 990- 1996), statutory
language fiom other states, literature review of relevant studies, public testimony, and
committee discussion. The f ~ scto nsensus point was on definitions of " direct access"
and " point of senrice".
Direct Access: means a system in which enrollees or members in a managed care
company can refer themselves directly and without penalty to a specialist within the
managed care company's designated provider network without having to be referred by
the enrollee's or member's primary care provider.
Point- of- Service: means a delivery system or contact option that pennits a member or
enrollee of a managed care company to receive health care services outside the
designated provider network of the managed care company under the tenns and
conditions of the member's or enrollee's contract with the managed care company, with
higher co- insurance payments and deductibles associated with the point- of- senrice
option typically borne by the enrollee or member.
The purpose of the agreed- upon definitions was for a point of reference by the
Subcommittee during deliberations and discussion. The meaning of the term " specialist"
in the direct access definition was identified as a potential obstacle for the group to
complete its charge and therefore, the group moved beyond this stumbling block to the
bigger issues of consumer access.
Subcommittee members were encouraged to submit materials for critical review and
analysis to the committee. In addition, members were encouraged to invite experts to
share information with the committee. Many experts presented to the group, they
included; the CEO fiom United Health Care, the Medical Director from
SamaritanCHealth Partners, the Executive Director fiom the AZ Pharmacy Association, a
Chiropractic Physician, the Chairman of the AZ Nurse Practitioner Council, a patient
and Medicare beneficiary, and a Physical Therapist.
Frequently, the testimony received by the subcommittee appeared to be in conflict with
regard to the accessibility to certain specialists, namely chopractic care providers.
Conflict in testimony was also heard with regard to the cost of specialty care. However,
it was generally agreed that managed care companies appear to be increasingly open to
offering their members a wider variety of health care options. These increased options
are dnven by competition in the health care marketplace. Several members of the
Subcommittee believe that while changes are occurring, it is arriving at a pace that is far
too slow.
After researching statutes fiom other states, it was generally recognized by members of
the Subcommittee that solutions implemented in other states will not always provide
solutions to the problems facing Arizonans. Arizona is unique in terms of the number of
enrollees and members in managed care companies as well as the layout of Arizona's
statutory scheme.
Current Models:
Health Care Services Organizations, fiequently called HMOs, represent one of a variety
of models providing health care to individuals and businesses in Arizona. Most models
use the medical doctor/ doctor of osteopathy ( MDDO) as the " gatekeeper" or
" coordinator of care" for persons enrolled in health plans. Consumer demand has
initiated changes in " direct access" opportunities for consumers. Therefore, some new
HMO products are allowing consumers to make direct appointments with certain pre-determined
MD/ DOs without the prior approval of the prirnw care provider. A report
prepared by the American Association of Health Plans, revealed twenty- one states have
some form of direct access availability. This report brought to light the fact that thirteen
states currently have direct access to OBIGYN, two to Chiropractic, one to Podiatry, one
to Optometry/ Ophthalmology, one to Dermatology, and one to registered nurse
practitioners ( nurse midwives/ nurse anesthetist, nurse practitioners). Although most
direct access options are offered on a limited basis in HMO models, these options are
available to consumers. At this time, few HMOs are prepared to completely abandon the
traditional MDDO gatekeeper model.
Point- of- service options are offered by most of the HMOs in Arizona, as well as by
other types of managed care entities such as PPOs. These options are avadable to
virtually all employers, typically with an increased premium to cover the anticipated
higher out of network costs.
The reality of Medical Savings Accounts ( MSA) was discussed with passage of the
Health Insurance Portability and Accountablliry Act ( KennedyKassebaum bill). The
Subcommittee reviewed a chart that outlined existing state laws applicable to 1)
accountable health plans, 2) individual health insurance in Arizona, and 3) definitions
and key terms in the federal law ( KennedyiKassebaum). MSAs will provide employers
and employees the most liberal option related to choice of providers and direct access to
specialists. Arizona will need to be prepared for compliance with the federal law by
January 1, 1997.
-- Re cSoumbmmietn thdiast rioepnos: r t to the full Committee for discussion and deliberation Encourage " MD/ DO gatekeepers/ coordinators of care" to be true integrators of care.
Gatekeeper models may limit, rather than truly integrate patient care. Gatekeepers
may be financially penalized for refends to specialists. Those that may experience
- the trauma related to delayed decision- making are often patientdfamilies. Encourage integration of other health care professionals ( non MDIDO) in the
delivery of health care within managed care associations. A growing number of
studies suggest that other health care professionals may provide cost effective,
quality care to their patients. Attached are examples of studies that the Subcommittee
reviewed. We recognize that this is not an exhaustive list and that many studies were
- not made available to the subcommittee and subsequently not analyzed. Continue to strengthen options for small business owners to access quality, cost
- effective health insurance that is affordable. Integrate the concept of " Medical Savings Accounts" in Arizona to assure
compliance with federal mandates. We recognize that MSAs have the potential to
- increase consumer/ member participation in health care decision making. Encourage the full Committee to recognize that Arizona has an opportunity to create
state specific laws that assure compliance with the KennedyKassebaum bill.
Request a presentation to the hll Committee from the AZ Department of Insurance
- regarding any needed changes to current law. Encourage communication mechanisms for employers and employees to make their
desires and needs known to managed care associations in regard to services and
- benefits. Encourage further development of long- term products.
Summary:
Subcommittee 2 submits this report to the full Committee recognizing the time
constraints and limitations of the members involved. We recognize the importance of
these topics to the health and well- being of Arizonans. The philosophy of managed care
as the predominant health benefit payment system is admirable. The goals of cost
containment, patient satisfaction, and quality outcomes are consistent with the charge
given to this Subcommittee. We recognize that the health care marketplace is dynamic
and must be responsive to consumer/ provider demands. This report recognizes that
contributions can be made by other health care providers ( non MD/ DO) in the delivery
of health care and suggest that such providers may enhance the economic and quality
goals of managed care associations.
Members of the Subcommittee would like to stress the importance of employers
educating their employees with regard to health care options, the importance of long-tenn
care, and the increased use of " Medical Savings Accounts" for individuals truly
seeking unfettered choice. In addition, consumers of health care must recognize that
managed care organizations can respond to the desires of their enrollees only when those
desires are effectively communicated to the managed care organization.
N. COMMITTEE RECOMMENDATIONS
On November 12, 1996, the Joint Interim Study Committee on Health Care Quality
recommended that legislation be drafted to ensure Arizona's statutory alignment with the
provisions of the Health Insurance Portability and Accountabilty Act of 1996.
V. COMMITTEE MINUTES
Handouts and other distributed materials cited in the committee minutes are on file in the
Office of the Chief CIerk.
ARIZONA STATE LEGISLATURE
JOINT INTERIM STUDY COMMITTEE
ON HEALTH CARE QUALITY
Minutes of the Meeting
Wednesday, September 1 1, 1996
2: 00 p. m., Senate Hearing Room 1
Members Present
Ms. Abalos
Dr. Aung
Mr. Barclay
Dr. Fuhr
Mr. Grosjean
Ms. Harmsen
Mr. Harris
Ms. Keilberg
Mr. Landrith for Dr. Dunn
Ms. McNamara
Ms. Sutton
Representative Mortensen
Representative Grace, Co- Chair
Senator Kaites, Co- Chair
Members Absent
Dr. Cruickshank
Dr. Dunn
Ms. Hendrickson
. , Ms. Leader
Mr. Nimsky
Ms. Yarbrough
Senator Day
Senator Hartley
Senator Kennedy
Senator Petersen
Representative Gerard
Representative Horton
Representative Nichols
Staff
Ellen Poole, Research Analyst, Senate Banking and lnsurance Committee - 542- 31 71
Lisa Block, Research Analyst, House Health Committee - 542- 1 989
Jim Drake, Research Analyst, House Banking and lnsurance Committee - 542- 3862
Co- Chairman Kaites convened the meeting at 2: 05 p. m. and turned the meeting over to
Co- chairman Grace. He introduced her as the party who will take the lead in directing the
Committee.
Co- chairman Grace welcomed members and noted Committee recommendations are due
at the end of November, 1996, necessitating that members meet every other Tuesday until
that time. She acknowledged the Committee charge seems rather broad ( filed with original
minutes) but emphasized her wish to see the Committee as a place to focus on anually
recurring concerns and the controversy that surrounds them.
Representative Grace indicated that members would be divided into three Subcommittees
according to their expressed interests, as listed on a handout ( filed with original minutes).
She noted that each Subcornmlttee would deal w~ tha separate aspect of the charge, as
listed on another handout, ( filed with orlglnal mlnutes) and requested that Subcommittee
September 11, 1996
Page 2
STUDY COMMITTEE ON
HEALTH CARE QUALITY
# I additionally review the federal Kennedy- Kassebaum legislation to see if it requires
conforming legislation on the state level and also noted that Senator Day will be visiting
Subcommittee # 1 to insure it does not duplicate legislation she is developing.
Representative Grace further requested that members try to look at concerns in a fresh
perspective and not bring back old ideas for more mandates, as the sitting Legislature
would not be sympathetic to this approach. Representative Grace encouraged members
to develop fresh perspectives on how to better use existing resources without adding new
costs.
Senator Kaites requested that the full Committee receive a briefing on the Kennedy-
Kassebaum legislation to determine whether state statutes need to be brought into
conformance. Representative Grace asked that Subcommittee # 1 review the legislation
and provide its recommendations on necessary conformities to the full Committee.
Representative Grace asked that members next break out into their designated
Subcommittees to elect chairmen, reminding them to call upon legislative staff for
assistance and information. She announced subsequent meetings will be held in House
Hearing Room 3 as scheduled on a third handout ( filed with original minutes) distributed
to members.
Legislative staff, Ellen Poole, Jim Drake and Lisa Block, introduced themselves and related
that Ms. Poole will be staffing Subcommittee # 1, Mr. Drake will be staffing Subcommittee
# 2 and that Ms. Block will be staffing Subcommittee # 3. They each invited members to
contact them for assistance and Mr. Drake distributed a brief summary of health insurance
legislation in Arizona from 1990 to 1996 ( filed with original minutes).
Without objection, the meeting was adjourned at 2: 25 p. m. and members grouped
themselves in designated Subcommittees to elect chairmen.
Respectfully submitted,
. -
Alice Kloppel
Committee Secretary
MEETING OF COMMITTEE ON
Hearing Room N 0 . 3 f \ k 4 I
OPT€ cq - \ \ - c\ Q
\--~ ALTH C ~ e kG ui\ lr~ r T IME 2-: C ~ Cn! nq
REPRESENTING BILL NO.
ARIZONA STATE LEGISLATURE
JOINT INTERIM STUDY COMMITTEE
ON HEALTH CARE QUALITY
Minutes of the Meeting
Tuesday, November 12, 1996
1.00 p. m., Senate Hearing Room 1
MEMBERS PRESENT
Representative Grace, Co- chairman
Senator Kaites, Co- chairman
Senator Hartley
Senator Kennedy
Senator Petersen
Representative Gerard
Representative Horton
Representative Mortensen
Dr. Barbara Aung
Mr. Steve Barclay
Dr. Alan Fuhr
Mr. Henry GrosJean
Ms. Constance Harmsen
Mr. Greg Harris
Ms. Marci Hendrickson
Ms. Anne McNamara
Mr. Brian McNeil
Ms. Barbara Sutton
MEMBERS ABSENT
Senator Day
Representative Nichols
Ms. Sandra Abalos
Dr. John Cruickshank
Dr. Robert Dunn
Ms. Barbara Keilberg
Mr. John Nimsky
Ms. Mary Yarbrough
STAFF
Ms. Kitty Boots, Senate Analyst
Ms. Lisa Block, House Analyst
Mr. Jim Drake, House Analyst
Co- chairman Grace convened the meeting at 1: 15 p. m. and the attendance was noted.
She next called upon Subcommittee chairmen to report their recommendations to the full
Committee.
Henry GrosJean, Chairman, Subcommittee # Ir, e ported this Subcommittee discussed
issues surrounding health care quality measures and noted that progress is being
exhibited in this area with reporting requirements and performance measurements
developed by the National Committee for Quality Assurance ( NCQA). He indicated the
Subcommittee has a wait- and- see position relative to these national measures as it is still
in its infancy. Mr. GrosJean also related that Senator Day informed the Subcommittee of
her proposed appeals legislation, that Arizona Health Care Cost Containment System
( AHCCCS) representatives reported on its quality indicators program and that the medical
director of the Health Services Advisory Group, currently known as the Quality
Improvement Organization, explained its program to develop medical standards based on
patient perception with the aim of creating a more personal approach to health care
delivery.
November 12,1996
Page 2
JOINT INTERIM STUDY COMMITTEE
ON HEALTH CARE QUALITY
Mr. GrosJean indicated Subcommittee # aIl so heard testimony from the Department of
Insurance ( DOI) on the KennedylKassebaum bill and that the Subcommittee recommends
no legislative action be taken relative to its deliberations.
Anne McNamara, Ph. D., Chairman, Subcommittee # 2, submitted a four- page report
( filed with original minutes) in response to its charge to study direct patient access and
point- of- service options in terms of affordability, availability, quality of small group health
insurance and cost implications for patients and employers. She related the Subcommittee
recommendations, which also require no specific legislation at this time: 1) submit
Subcommittee report to full Committee, 2) encourage Medical DoctorlDoctor of Osteopathy
( MDIDO) gatekeepers/ coordinators of care to be true integrators of care, 3) encourage
integration of other health care professionals ( non MDIDO) in the delivery of health care
within managed care associations, 4) continue to strengthen options for small business
owners to access high quality, cost effective health insurance that is affordable, 5)
integrate the concept of " Medical Savings Accounts" ( MSAs) in Arizona to assure
compliance with federal mandates, 6) encourage the full Committee to recognize that
Arizona has an opportunity to create state- specific laws that assure compliance with the
KennedyIKassebaum bill and request a presentation by DO1 to the full Committee
regarding such, 7) encourage communication mechanisms for employers and employees
to make their desires and needs known to managed care associations in regard to services
and benefits and 8) encourage further development of long- term care products.
Dr. McNamara also related the Subcommittee's wish to stress the importance of employers
educating their employees with regard to health care options, the importance of long- term
care options and the importance of increasing the use of MSAs for individuals truly seeking
unfettered choice. In addition, she emphasized consumers of health care must recognize
that managed care organizations can respond to the desires of their enrollees only when
those desires are effectively communicated to the organization.
Dr. McNamara suggested that the concept of " integrator of care" is a good one, but it is
often jeopardized, as gatekeepers may be financially penalized for making referrals to
specialists. She emphasized not losing sight of incentives which may have a negative
impact on patients and their families.
In response to Senator Kaites' request to be provided with examples of how such penalties
are created in the system, Dr. McNamara referred to articles the Subcommittee reviewed
which looked at capitation models which recognized that referrals are deducted from the
primary care providers' full capitation.
Mr. Barclay clarified that some forms of compensation may create financial incentives or
penalties to cause providers to think twice before making referrals to specialists. He
JOINT INTERIM STUDY COMMITTEE
ON HEALTH CARE QUALITY
November 12,1996
Page 3
emphasized the Subcommittee did not intend to condemn the practice altogether, but to
raise the issue that it needs to be watched.
In response to Senator Kaites' request to hear examples or see statistics of how this
procedure drives down quality of care, Mr. Barclay responded he would provide some of
the numerous studies which have been published. Mr. Barclay further acknowledged the
studies are inconclusive and that most of them suggest there has not been a marked
decrease in the quality of care.
Dr. Barbara Aung, substituting for the Chairman, Dr. John Cruickshank,
Subcommittee # 3, reported on credentialing and recredentialing, the licensure process,
provider termination issues and provider impact on small business and employers. She
reported that Subcommittee # 3 recommends no legislation, but would like to impart
information to managed care organizations regarding coordinating the credentialing
process so as to avoid duplication and to reduce costs. Dr. Aung indicated information-sharing
among organizations would limit the amount of work providers have to undertake
to maintain credentialing and recredentialing. She also emphasized that sharing
information should extend to providers, employers and that employees, patients employers
should also be educated about regulations which managed care organizations expect
providers to follow and about what is expected in terms of providing services under their
contracts.
In response to Representative Grace's request for more information on the current
credentialing process, Dr. Aung acknowledged the Subcommittee is encouraged that the
process which formerly has seemed to be hidden is now sharing information more openly,
especially through the Greater Arizona Centralized Credentialing Program. She indicated
the Program is using set criteria based on NCQA guidelines for all providers in Arizona
and is sharing this information with the managed care companies in the State.
In response to Representative Grace's inquiry about the credentialing turnaround time for
the average practitioner, Dr. Aung indicated it is currently six months to one year and the
Program now has a mandate of 90 to 120 days which is an improvement. Dr. Aung noted
testimony revealed one hold- up in credentialing is trying to obtain past histories of
practitioners going back 20 years or obtaining histories from another country or state.
Mr. Barclay acknowledged this centralized clearinghouse has received certification as a
Centralized Verification Organization ( CVO) and is a very encouraging improvement,
noting that currently the primary source checks for practitioners are duplicated by every
plan, consuming lots of time and requiring sources to provide information on one
practitioner many times over.
November 12,1996
Page 4
JOINT INTERIM STUDY COMMITTEE
ON HEALTH CARE QUALITY
Senator Kaites moved to accept the Subcommittee reports.
Representative Horton seconded the motion. The motion CARRIED by
a voice vote.
DEPARTMENT OF INSURANCE PRESENTATION
Greg Hams, Assistant Executive Director, DOI, distributed handouts ( filed with original
minutes) comparing key elements of the federal legislation, the KennedyIKassebaum bill,
to existing Arizona laws applicable to accountable health plans, MSAs and long- term care
insurance. He highlighted misconceptions about what the KennedyIKassebaum bill does
and discussed provisions that the Arizona Legislature will need to consider under
insurance laws and also noninsurance law issues which will need to be addressed.
Mr. Harris indicated the key piece of the federal legislation is one that addresses group
coverage and the ability of individuals who have been in group coverage to convert to
individual coverage. He noted that the Legislature will need to move legislation to comply
with the federal mandate defining small groups as two to 50 lives, eliminate the current 90-
day waiting period for groups to become eligible and change the current 12- month look-back
period to six months.
Mr. Harris explained the federal law now allows employers to establish a two- month
" affiliation periodn before employees become eligible to enroll in a health maintenance
organization ( HMO). He further explained that federal legislation prohibits the
consideration of pregnancy as a preexisting condition, requires no waiting period for
preexisting conditions if the employee had been previously covered by a group plan for 12
months before changing employers with no more than a 63- day break in employment and
allows an employee to carry waiting time forward if he changes employers.
Mr. Harris indicated there are no significant changes to Arizona's guaranteed renewability
laws, continuing to provide for renewal except where there are violations such as fraud or
deceit on an application. He related disclosure requirements will now be extended to
indemnity plans as well as managed care plans under the federal legislation and this will
need to be addressed by the Legislature.
Mr. Harris explained the federal legislation requires that if an insurer wants to exit a
particular segment of the market, it must stay out of the market for five years. He noted
there is no federal requirement for tie- in between participation in small, large or individual
markets as there is currently in Arizona law. In regard to the insurer's inability to serve a
specific market, it would need to withdraw from this segment only for 180 days and would
not need to withdraw from the insurance market altogether.
JOINT INTERIM STUDY COMMITTEE
ON HEALTH CARE QUALITY
November 12,1996
Page 5
Mr. Harris indicated that federal legislation requires all individual coverage be guaranteed
renewable. In regard to converting from group to individual coverage, he explained the
federal legislation provides this option once a person has exhausted any COBRA
( Congressional Omnibus Reconciliation Act) benefits available to him and can prove he
is not eligible for Medicaid or Medicare.
Mr. Harris explained federal long- term care provisions and viatical settlement provisions
use tax incentives as a way to encourage people to purchase products in a certain
direction. He also explained the federal MSA legislation creates a pilot project with a
nationwide cap of 750,000 participants. Mr. Harris indicated these will be administered by
the Department of Revenue in Arizona and the Federal Treasury will provide oversight to
insure the caps are maintained. He explained that the primary result of federal legislation
on long- term care policies is that benefits paid out will not be taxable income. He also
noted there will be no changes necessary in Arizona law in response to this provision. Mr.
Harris explained that federal legislation relating to viatical settlements mandates that any
cash- out of a policy used to pay for the costs of a catastrophic or life- ending illness are tax
exempt. He also indicated there is no need to change Arizona laws to comply with the
federal legislation in regard to viatical settlements.
In response to Representative Gerard's inquiry about federal mandates regarding mental
health parity, Mr. Harris explained that H. R. 3666, signed a couple of weeks after the
KennedyIKassebaum bill, does not require that a health plan include a mental health
benefit, establishing that if the cost to include a mental health benefit exceeds a one
percent increase in premium cost, the insurer is not required to include that benefit. He
confirmed Representative Gerard's understanding there is no mental health parity included
in the federal legislation.
Mr. Harris clarified that the KennedyIKassebaum bill and H. R. 3666 address not only state
insurance plans but also ERISA ( Employment Retirement Income Security Act) plans. He
explained the U. S. Department of Labor will continue to insure compliance of ERISA plans
with federal law, whereas DO1 will continue in this role for the State. Mr. Harris clarified
that legislation or another mechanism will need to be adopted to affirm that DO1 has the
specific regulatory authority in this area.
In response to Senator Petersen's inquiry about how the federal preexisting conditions
provisions affect congenital birth defects, Mr. Harris explained that if a child is covered
under an existing plan for the condition at birth and before moving to a new policy, the
federal legislation would not allow a preexisting condition exclusion if the family moves to
a new plan.
In response to Senator Petersen's inquiry about simple interest on long- term care benefits,
Mr. Harris explained he could not answer the question specifically today, but indicated the
November 12,1996
Page 6
JOINT INTERIM STUDY COMMITTEE
ON HEALTH CARE QUALITY
federal legislation addresses this area on a perdiem or lump sum basis which may have
some bearing on the issue. In regard to income thresholds in long- term care, Mr. Harris
explained the federal legislation establishes a mechanism that would allow a person to
choose between a lump sum or perdiem payout of benefits with variable tax
consequences.
Representative Grace inquired about the relationship between health conditions which
may affect pregnancy and federal preexisting conditions provisions. Mr. Harris explained
that pregnancy, which cannot be treated as a preexisting condition, would be taken out of
consideration, the ancillary condition would be treated separately and it would be
determined by further inquiry whether the ancillary condition was pregnancy- related or
preexisting.
In response to Dr. McNamaraJs concern about self- employed people with potential health
issues being denied coverage, Mr. Harris confirmed the KennedyIKassebaum bill does not
address eligibility, but emphasized that Health Care Group, already in existence, provides
programs for self- employed groups from one to 40 with no preexisting condition exclusion,
but with a limitation on benefits for preexisting conditions.
Dr. McNamara also inquired about protection for the individual when an insurance
company decides not to renew and Mr. Harris explained this issue is left, in part, for the
states to address. He further explained that under S. B. 1 109, passed in 1993, if an insurer
wants to pull out of a line of business or rid itself of a particular group, the consequences
are high; it must be out of the market for a long while and a six- month notice must be given
to customers.
Mr. Barclay added that the KennedylKassebaum bill will also apply to the public plans,
such as Health Care Group. In response to his request to know if the State needs to do
anything to comply with federal MSA provisions, Mr. Harris explained this needs more
study but noted the Department of Revenue is the agency through which MSA companies
must register and that DO1 has not thoroughly studied the issue.
Mr. Barclay noted the federal legislation makes it possible for federally qualified HMOs to
participate in the high deductible coverages that would overlay the MSAs and suggested
there may be a need for a change to the state HMO laws to allow this flexibility. Senator
Kaites acknowledged the need to address this issue in a separate piece of legislation
affecting Title 42 rather than Title 20.
Mr. Barclay likened an MSA to a financial product such as an Individual Retirement
Account, but asserted since the high deductible coverage is the piece that needs to be
reworked, this would require a Title 20 change as well. He acknowledged the entire issue
may require two pieces of legislation.
JOINT INTERIM STUDY COMMITTEE
ON HEALTH CARE QUALITY
November 12,1996
Page 7
Representative Grace related that Senator Day has opened a bill file to address issues
relating to health care quality and agreed it is appropriate that a bill be moved in the next
session.
Mr. Barclay commented there will be a rush to participate in the MSA pilot project which
has an effective date of January 1, 1997 and that his Subcommittee suggests any
legislation affecting this should be fast- tracked, while legislation affecting other
KennedyIKassebaum compliance issues can wait a little longer.
Senator Kaites moved the Committee recommend legislation be drafted
to deal with the main issues relating to Medical Savings Accounts as
well as the general issues outlined by the Department of Insurance
relating to implementation of the federal KennedyIKassebaum bill.
Representative Mortensen seconded the motion. The motion CARRIED
by a voice vote.
Senator Kaites instructed staff to coordinate with Senator Day, who is already working on
related legislation, and asked staff to distribute all draft legislation to Committee members
as it is developed.
Representative Grace announced there would be no more meetings scheduled and
adjourned at 2: 15 p. m.
Respectfully submitted,
Alice Kloppel,
Committee Secretary
( Tapes and attachments on file in the Office of the Senate Secretary)
November 12,1996
Page 8
JOINT INTERIM STUDY COMMITTEE
ON HEALTH CARE QUALITY
MINUTES OF
SUBCOMMITTEE # I OF THE
STUDY COMMITTEE ON HEALTH CARE QUALITY
DATE: Tuesday, September 17,1996
TIME: 10: OO a. m. - noon
PLACE: House Hearing Room # 3
Members Present:
Dr. Robert Dunn
Ms. Constance Harmsen
Mr. Greg Harris
Ms. Mary Leader
Ms. Barbara Sutton
Representative Herschella Horton
Mr. Henry Grosjean, Chairman
Members Absent:
Ms. Mary Yarbrough
Representative Susan Gerard
Senate Staff: House Staff:
Ellen Poole Mark Bogart
Jim Drake
Chairman Grosjean called the meeting to order at 10: lO a. m. and explained the
meeting agenda calls for discussion of the federal Kennedy- Kassebaum Bill and the
current status of the establishment of quality measurement standards, licensing
requirements, and solvency requirements.
Ms. Poole stated the Arizona Health Care Cost Containment System ( AHCCCS) is
presently reviewing the Kennedy- Kassebaum Bill and will be preparing an analysis and
recommendations. She added the Department of Insurance ( D01) is conducting a
similar review. Ms. Poole explained she was unabie to get in touch with AHCCCS
personnel to make a presentation to the subcommittee today, but hopes to do so by the
next meeting.
Mr. Harris explained DO1 has not completed its review of the Kennedy- Kassebaum Bill
and would prefer to wait for that information before giving a formal presentation.
Chairman Grosjean opened the discussion to the quality of health care and what
" quality" means in terms of hospitals and providers.
Ms. Harmsen referred to the following handouts ( filed with original minutes) relating to
hospitals and their definition of quality:
SUBCOMMITTEE # I OF THE
STUDY COMMITTEE ON HEALTH CARE QUALITY
September 17,1996
Page 2
Quality Indicator Project - Maryland Hospital Association ( MHA)
In 1985 Maryland was the initial group to make the effort to provide indicators for
quality and most states look to Maryland when trying to develop effective
indicators.
Exhibit 2 - Acute Care Nursing Quality Indicators
Examples of quality nursing that the American Nursing Association ( ANA) is
attempting to establish in all of the states. Arizona received a grant and a
number of the acute care facilities in the state will be participating in the ANA
project over the next three years.
Samaritan Health System Clinical Quality Indicators Results by Facility
Example of the indicators for the Samaritan facilities which is presented to the
board on a quarterly basis.
Samaritan Health System - Definitions For All Performance Indicators
Gives an idea of the challenge in gathering data to insure an accurate
indicator is obtained.
Samaritan Health System Quality Plan
Example of definitions of quality and how hospitals are viewing quality.
HEDIS 2.0: Executive Summary
( Health Plan Employer Data and Information Set) Source used by managed
care plans and out- patient settings in demonstrating quality indicators.
Chairman Grosjean stated he understood there is a new HEDlS 3.0 version. Ms.
Harmsen indicated she did not know and was not an expert in the area.
In responding to Chairman Grosjean, Ms. Harmsen indicated Maryland's information is
public, however, individual states make their own decisions to publicize information.
She added it was her understanding that Arizona's is not public.
Ms. Harmsen indicated there were two journals published this year rating Health
Maintenance Organizations ( HMOs) using the HEDIS information.
Representative Horton, a registered nurse for many years, stated quality means
different things to different people, is very difficult to measure, and needs to be defined
as far as balancing quality with cost. In response to Chairman Grosjean, she stated
she did not think the Legislature has any preconceived notions regarding this issue.
Dr. Dunn stated he has a fee- for- service practice in Mesa, and also contracts with 32
HMOIPPO's. He apologized for not attending the first meeting and questioned if the
subcommittee is concerned only with quality of managed care as opposed to
physicians, hospitals, managed care insurance companies, etc. He stated he has
September 17,1996 SUBCOMMITTEE # OlF THE
Page 3 STUDY COMMITTEE ON HEALTH CARE QUALITY
experience in quality review and pointed out that some hospitals take care of more
critically ill people and therefore have a higher instance of mortality.
Ms. Sutton stated quality of care is a big issue and carriers and consumers define it
differently. She noted as more people are moving to a managed care environment,
they are concerned about their accessibility to a physician they prefer and most
managed care companies have accommodated those concerns to some extent. She
added she also serves on the HMO task force which is attempting to address complaint
procedures. Other problems she identified are the inability to obtain health care and
the ability to retain health benefits at an affordable cost when a person leaves their
employment.
Ms. Sutton suggested the subcommittee look closely at outpatient studies in terms of
establishing standards and conceded it was a tremendous challenge for one
committee.
Mr. Harris stated DO1 receives complaints addressing the quality issue, both with
respect to managed care plans and indemnity plans. He stated the issue prompting the
establishment of the task force was whether there needs to be a mechanism within
state government, and if so, where should it be located.
Mr. Harris noted under current law DO1 has the responsibility for the solvency of
insurance companies and for managed care organizations like HMOs. He suggested ,
the subcommittee should determine whether there is a need for new legislation, or if the
legislation in place is sufficient, and proceed from there. He emphasized it is important
not to lose sight of the distinction in the way people receive their health care ( i. e.
indemnity versus managed care).
In response to Ms. Sutton, Mr. Harris stated the number of complaints against HMOs as
opposed to fee- for- service providers is probably comparable, but the public perceives
HMOs as having more complaints.
Dr. Dunn stated a problem he encounters is that patients do not understand what is
offered in plan brochures and would suggest a program to educate the consumer. Ms.
Sutton stated that should be the responsibility of insurance agents or consultants and
employers should provide employee informational meetings. She added the
mechanism is in place, but perhaps is not being followed, and ultimately it is the
employee's personal responsibility to study the options available.
SUBCOMMITTEE # 1 OF THE September 17,1996
STUDY COMMITTEE ON HEALTH CARE QUALITY Page 4
Chairman Grosjean suggested insurance provider brochures should be more consumer
friendly.
Dr. Dunn stated that problems also arise when a patient chooses an HMO and then
finds out that a particular treatment is not a covered expense ( i. e. transplants).
Representative Horton stated people cannot predict future medical needs, and they do
not expect to be " dumped" when a catastrophic illness arises after paying premiums for
many years.
In response to Ms. Sutton, Dr. Dunn stated the Medical Association does not set out
protocols. Ms. Harmsen indicated some professional associations do have protocols
that are monitored through their own quality review departments.
Ms. Harmsen suggested the subcommittee discuss the ways available to assure safe,
quality health care and submit recommendations to the Legislature. She stated to
effectively study the issues, expertise from other states should be gathered and
presented to the subcommittee.
Dr. Dunn proposed first establishing a mission statement. Representative Horton read
what she believed to be the mission statement of the subcommittee: To establish quality
measurement standards, licensing requirements and solvency requirements.
Representative Horton suggested the next meeting's agenda address the existing state
requirements regarding consistent quality measurements, licensing and solvency.
Mary Leader, Governor's Policy Advisor for Health and Human Services, suggested
DO1 and DHS as information resources and noted AHCCCS is in the process of
developing outcome measurements for their health plans.
Representative Horton stated it's " kind of hard to know how you're going to get there
when you don't know where you are right now" and suggested the subcommittee
develop a baseline of what the State has in place presently for licensing and solvency
requirements.
Mr. Harris, addressing the solvency issue, stated DO1 is well equipped to measure the
financial strength of companies. He suggested one of the issues the subcommittee
may want to look at are entities that deliver health care that are not licensed as
insurance companies, such as provider hospital groups or other groups that share in
the commerce of health care. He explained an area untouched by legislation is an
September 17,1996 SUBCOMMITTEE # 1 OF THE
Page 5 STUDY COMMITTEE ON HEALTH CARE QUALITY
entity ( i. e. doctor, hospital), not in the business of assuming risk, that is not required to
be licensed by DOI. The only license required is that relating to medical practice. He
added some states have considered solvency requirements since the doctor or hospital
could potentially fail.
Representative Horton agreed there should be some kind of solvency requirements
because some hospitals and clinics have filed bankruptcy. She suggested the next
meeting could address what baselines are presently in place addressing these issues.
In response to Ms. Sutton, Mr. Harris stated legislation would be required for DO1 to
establish any additional licensing criteria for any entity that does not already fall under
the scope of Title 20. He indicated DO1 works with the Governor's Office to develop
programs and recommendations.
Representative Horton emphasized that one of the complaints she hears from providers
is that the more licensing requirements imposed, the more the cost is driven up and the
Legislature has looked very carefully at that issue as a means of keeping down the cost
of health care.
Mr. Harris stated DO1 does look at solvency when regulating HMOs and has shared
regulatory responsibility over HMOs with the Department of Health Services ( DHS).
Representative Horton suggested a representative from DHS present information on
licensing requirements at the next subcommittee meeting.
In response to Chairman Grosjean, Mr. Harris stated there is no statute defining or
regulating a Physician Hospital Organization ( PHO). He added if a PHO is assuming
insurance risk, then they would be subject to licensing requirements as an insurer.
Chairman Grosjean called for a ten- minute recess at 1 1 : 10 a. m.
The meeting reconvened at 1 1 : 20 a. m
Representative Horton suggested that at the next meeting representatives from DHS,
DO1 and AHCCCS present a briefing on Arizona licensing, solvency and quality
measurement standards compared to other states and a review of the Kennedy-
Kassebaum Bill.
SUBCOMMITTEE # 1 OF THE
STUDY COMMITTEE ON HEALTH CARE QUALITY
September 17,1996
Page 6
Mr. Harris stated he would not be able to attend the next meeting on October 1, 1996,
however, if available, Mary Butterfield from DO1 could take his place in the discussions.
Ms. Poole stated she was informed by Lisa Block, the House Health Analyst, that
because of Senator Day's schedule, this subcommittee meeting time would be moved
to 3: 00 to 5: 00 p. m. Representative Horton stated she prefers the 10: OO to noon
schedule and has some of the same concerns as Senator Day.
Ms. Sutton suggested both subcommittees could meet at the same time since the same
members were not on both subcommittees. Mr. Poole suggested the subcommittee
members discuss it with the Study Committee cochairpersons, Senator Kaites and
Representative Grace. Ms. Sutton agreed, so that everyone can be accommodated.
In response to Ms. Harmsen, Ms. Poole indicated Senator Day had a conflict with
another committee meeting and could not address the subcommittee today regarding
HMOs. Ms. Harmsen suggested that Senator Day's presentation also be added to the
next subcommittee meeting agenda.
Chairman Grosjean stated he wanted to keep the 10: OO a. m. time and would contact
the subcommittee members as to where the next meeting would be held.
Ms. Sutton suggested if Senator Day is unable to attend the October 1, meeting she
could provide written material for distribution to the members.
Representative Horton suggested the Directors of DHS, DO1 and AHCCCS be
contacted to select the person they want to speak to the subcommittee. Ms. Leader
stated she would be meeting with the agency directors this afternoon and would ask at
that time.
Ms. Harmsen asked for the background materials on the Kennedy- Kassebaum Bill
which was to be provided at today's meeting, based on last week's discussions.
Representative Horton stated she has a brief summary which she obtained by calling
the National Conference of State Legislatures. Chairman Grosjean asked Ms. Poole if
she would get a copy of the summary and make it available to the members.
Ms. Harmsen inquired whether there is agreement that the overall charge or goal of the
subcommittee is to assure the public safe, quality health care and to establish a
baseline. Representative Horton read the charge of the subcommittee from a letter she
received from Senator Kaites and Representatwe Grace: " This subcommittee will
address the issue cited in the committee charge as item # A, specifically, the
September 17,1996
Page 7
SUBCOMMITTEE # I OF THE
STUDY COMMITTEE ON HEALTH CARE QUALITY
establishment of consistent quality measurement standards." She added this includes
licensing requirements and solvency requirements. Ms. Sutton stated her notes from
the first meeting indicate that the subcommittee is supposed to discuss the issue of a
quality measurement standards " report card".
Representative Horton explained this is a Joint Interim Study Committee, established to
make recommendations to the Legislature that possibly will result in legislation. The
Committee may find that only administrative changes are required.
Ms. Leader clarified that the subcommittee is looking at all aspects of health care, not
just managed care. Chairman Grosjean and Representative Horton agreed.
Chairman Grosjean adjourned the meeting at 11: 35 a. m.
Respectfully submitted,
Tapes on file with the Secretary of the Senate's Office.
ARIZONA STATE LEGISLATURE
JOINT INTERIM STUDY COMMITTEE
ON HEALTH CARE QUALITY
SUBCOMMITTEE # 1
Minutes of the Meeting
Tuesday, October I , 1996
1 0: 00 a. m., House Hearing Room 3
MEMBERS PRESENT
Mr. Henry GrosJean, Chairman
Dr. Robert Dunn
Representative Susan Gerard
Ms. Constance Harrnsen
Representative Hershcella Horton
Mr. Brian McNeil
Ms. Mary Yarbrough
MEMBERS EXCUSED
Mr. Greg Harris
Ms. Barbara Sutton
STAFF
Ellen Poole, Senate Analyst
Chairman GrosJean convened the meeting at 10: 10 a. m. and the attendance was noted.
PRESENTATION ON THE HMO TASK FORCE
Senator Ann Day, HMO Task Force, related accomplishments of the Task Force which,
she noted, has finished its work. She indicated the Task Force agreed upon a health care
appeals bill which develops internal mechanisms insuring that quality health care is
delivered to all customers in the State. Senator Day noted the bill provides for government
procedures only when internal mechanisms do not accomplish their goal. She explained
the formal appeals process is for customers of all health plans in the State, including
indemnity plans, who have been denied health care services. It requires that the health
plans relate what factors they are going to rely upon to provide services and to adopt
written, objective and clinically valid standards and criteria to determine when medical
services must be provided. Senator Day noted these determinations of what is medically
necessary have been left up to the plans and will be applied in any denial of a covered
service and used as a basis for reviewing the denial. Once a patient and physician are
informed of a denial, they are also informed of their right to request an appeal and may ask
the Department of Insurance ( DOI) to set up an independent review panel to determine
compliance and fairness. Senator Day stated that a requirement to refrain from retaliation
against physicians and providers who inform their patients of other treatment options is
also being set forth.
Senator Day emphasized the proposed legislation deals with quality of health care
delivery, explaining that the Board of Medical Examiners will look at complaints against
physicians for " quality of care," that DO1 will provide recourse to customers in reviewing
October 1,1996
Page 2
STUDY COMMITTEE ON HEALTH
CARE QUALITY - SUBCOMMITTEE # 1
the delivery of care appeals processes and determining when patterns or systemic
problems occur; and that the Department of Health Services ( DHS) which will engage its
statutory oversight authority, to include visiting and investigating its licensees to insure
compliance with the quality assurance plans they file in order to receive certificates of
authority to deliver health care in Arizona.
Senator Day reviewed the timeline for the appeals process which begins with a
reconsideration after the initial denial within 30 days, followed by an independent external
reyiew by contacting DO1 or another formal internal review within the health plan. If the
patient is denied treatment in this process, he or she can request that DO1 set up an
external appeal by a panel of experts. Senator Day explained the panel could be made
up of one, two or three board certified physicians. She also noted there is a provision for
expedited appeals, which would probably only require one medical expert to review.
Representative Gerard noted she is also a member of the Task Force and emphasized the
goal was to establish flexibility in naming a panel of experts which would be determined
by what is being treated, e. g. to also address instances where a rare disease or condition
exists that only one expert in the nation may be able to address.
Mr. GrosJean asked if the appeals process is designed to complement the grievance
procedures that are already set up in the health plans.
Senator Day explained it establishes consistency so that all health plans are included
under this law and will handle appeals under the same timeline. She noted that any direct
or indirect denial of a covered medical service is the trigger which activates the appeals
process.
Senator Day also defined appeal as the external process used when a covered medical
service is denied and grievance as being something the health plan handles internally.
Ms. Harmsen asked if the Task Force performed an analysis of volume expectations, i. e.,
the number of customers who would utilize this process.
Senator Day indicated this was not discussed on the Task Force and Steve Barclay,
Arizona Association of Health Maintenance Organizations ( HMOs) provided input at
her invitation.
Mr. Barclay indicated the volume is an unknown, however expressed his view it will not be
excessively large and that most of the issues will be resolved internally. He explained
language has been designed not to address coverage issues, but to address issues where
there is a legitimate difference of opinion as to what is medically necessary. Mr. Barclay
expressed his hope the proposed legislation will codify existing practice and not add to it.
STUDY COMMITTEE ON HEALTH
CARE QUALITY - SUBCOMMllTEE # 1
October 1, 1996
Page 3
In response to Mr. GrosJean's request to know if any health carriers would be excluded
from the proposal, Senator Day expressed her understanding all plans which assume risk
are included.
DISCUSSION OF KENNEDY- KASSEBAUM BILL
Mary Butterfield, Assistant Director, Life and Health Division, DOI, distributed a
summary ( filed with original minutes) comparing specific aspects of current Arizona law
and the new federal law effective July 1, 1997. She reviewed the primary components of
the Kennedy- Kassebaum Bill which will require modification of Arizona statute, noting the
most significant components are the guaranteed renewability, portability and guaranteed
issue to small employers of two to 50 employees.
In response to Mr. GrosJean's inquiry about offering one or two like policies, Ms.
Butterfield acknowledged a higher and a lower benefit policy must be offered based on an
actuarial assumption of the value of the benefits.
Mr. GrosJean asked if this will apply to group policies as well as individual policies, and
Ms. Butterfield expressed her understanding it would not.
Mr. GrosJean asked if Ms. Butterfield foresees any regulatory actions becoming necessary
in order to comply. Ms. Butterfield acknowledged DO1 will be making recommendations
for revisions in the group health laws which conflict with or inhibit the application of the
new federal law.
In response to Mr. GrosJean's request for further elaboration on preexisting conditions
provisions, Ms. Butterfield explained that if a group health plan does not have a preexisting
waiting period, an HMO may have an affiliation, or waiting, period requirement where a
member must be enrolled, but not yet be paying a premium, for two or three months.
Ms. Harmsen questioned the role of the Study Committee in addressing conformity with
the Kennedy- Kassebaum Bill.
Ms. Butterfield indicated DO1 will be making recommendations to the Governor's Office for
legislation to be introduced in the upcoming legislative session. She additionally noted a
report on Arizona conformity measures must be made to the federal government by July,
1998.
Mr. GrosJean agreed the Committee may not be in existence that long and may not be
privy to these measures.
October 1,1996
Page 4
STUDY COMMITTEE ON HEALTH
CARE QUALITY - SUBCOMMITTEE # 1
Colleen Schroeder, Administrator, Healthcare Group ( HCG) of Arizona, explained
HCG is a separate organization within the Arizona Health Care Cost Containment System
( AHCCCS) program offering health care coverage to small businesses with 40 or fewer
employees, including the self- employed. Ms. Schroeder distributed a handout ( filed with
original minutes) highlighting the impact of the Kennedy- Kassebaum Bill on HCG and
reviewed the provisions in Arizona statute which will need revision to conform.
In response to Representative Horton's inquiry, Ms. Schroeder confirmed Medicare would
be included in the portability expansion of Medicaid.
Mr. McNeil asked if HCG has studied how premiums may be impacted by the conforming
changes. Ms. Schroeder responded that this work has not yet begun.
In response to Mr. McNeil's further inquiry about an HCG timeframe for accomplishing this
work, Ms. Schroeder indicated she would be attending a conference in Los Angeles next
week, after which work would begin, recognizing the limited timeframe HCG is under.
DISCUSSION OF SOLVENCY ISSUES
Debi Wells, Assistant Director, Office of Policy Analysis and Coordination, AHCCCS,
discussed the capitalization, financial viability standards and reporting requirements for
AHCCCS health plans. She distributed a handout ( filed with original minutes) specifying
requirements.
Ms. Butterfield additionally reviewed the financial requirements for an Arizona Certificate
of Insurance listed on the last page of her original handout.
Ms. Harmsen asked how many of the insurance companies as well as HMOs are not able
to meet these state requirements.
Ms. Butterfield responded that if insolvency does occur, DO1 puts the company under
supervision or into receivership. She indicated she could not provide a specific number,
expressing her understanding there are no current difficulties. Ms. Butterfield
acknowledged that in the 1980' s one or two companies were put under some sort of
supervision, merged with another company or went out of business.
Ms. Harmsen asked if enrollees of health plans are made aware of financial problems. Ms.
Butterfield indicated they are not specifically made aware, unless perhaps, their enrollment
is affected. She acknowledged there may be a need to notify enrollees if their company
was going to be reviewed in a public hearing or if very serious events were going to take
place.
STUDY COMMITTEE ON HEALTH
CARE QUALITY - SUBCOMMITTEE # I
October 1,1996
Page 5
Mr. GrosJean asked if a physicians' organization would fall under the financial parameters
discussed. Ms. Butterfield indicated these parameters would apply only if the organization
was licensed. She explained the level of activity is reviewed to determine whether or not
the organization needs a license, clarrfying that if they are not assuming risk or transacting
insurance they do not need a license.
In response to Mr. GrosJeanls further inquiry, Ms. Butterfield indicated Premiere Health
Plan is physicians' organization that obtained a license and would fall under the financial
requirements outlined.
Representative Horton asked if the two percent deposited in the Treasurer's Office by
HMOs serves the same purpose as the guaranty fund does for indemnity plans.
Ms. Butterfield indicated this two percent does not act in the same way as the guaranty
fund, but provides protection for a specific period of time. She also noted that HMOs are
required to take on the enrollees of any HMO which might become insolvent.
Mr. Barclay related that the national failure of Maxi Care in the mid 1980' s spurred the
tightening of solvency requirements, but that the HMO industry decided at that time it
would rather increase its solvency requirements than participate in the guaranty fund. He
related that all the Maxi Care enrollees were absorbed by other HMOs on a " blind" basis
upon the failure of this company. Mr. Barclay also noted early warning mechanisms have
been instituted, such as monthly reports of the numbers of providers dropped from a
network, suggesting a large number might be a sign the company is in trouble and needs
review. He asserted the increased efforts by the HMO industry are an adequate substitute
for participating in the guaranty fund.
DISCUSSION OF HEALTH CARE QUALITY MEASUREMENT STANDARDS
In response to Representative Gerard's request for input on the ongoing efforts of the
National Committee for Quality Assurance ( NCQA), Ms. Wells explained AHCCCS is using
NCQA's Health Plan Employer Data and Information Set ( HEDIS) as a baseline for
development of its activities, though indicated she could not speak to its impact on the
private sector. She noted that HEDIS has gone through a few revisions, indicating
AHCCCS is currently looking at the cumulative HEDIS 3.0 to see how it can comply.
Ms. Wells discussed the AHCCCS Quality Indicators Program, reviewing its purpose, the
indicators, timelines and specific acute care, long- term care, developmentally disabled,
and behavioral health related quality indicators as outlined in a handout ( filed with original
minutes).
October 1,1996
Page 6
STUDY COMMITTEE ON HEALTH
CARE QUALITY - SUBCOMMllTEE # I
Ms. Wells emphasized the Program is not intended to be punitive, but a vehicle for
continuing improvement and a focal point for future efforts among AHCCCS plans, noting
these quality measures can be reviewed during contract cycles and used to help determine
if and when sanctions are needed. She indicated that looking at outcomes is key and is
accomplished by compiling encounter data, e. g., the services received by a member on
a specific date, since AHCCCS does not use billings.
Ms. Wells discussed the current status of the Program, indicating AHCCCS is furthest long
with the Acute Care Program and emphasized the need to interpret data carefully, not
misconstruing a high number of low birth rates as a negative for a particular health plan
where high- risk pregnancies may be referred because this happens to be its area of
expertise.
Ms. Yarbrough asked if AHCCCS risk- adjusts its data and Ms. Wells confirmed this is the
intent.
Representative Gerard acknowledged risk is a critical determinant and must be adjusted
for. She expressed her hope AHCCCS does use risk adjustment.
Ms. Harrnsen commended the AHCCCS Quality Indicators Program and asked when it will
become part of the contracting process. Ms. Wells responded there is no date certain and
that AHCCCS would probably not be able to use it in the March 1997 contracting cycle.
Ms. Wells commented on the lessons AHCCCS has learned in the process; emphasizing
that it is essential to have collaboration among all parties involved, that it is important that
everyone involved understands each others' languages and clinical systems and that it is
necessary to view things from a variety of perspectives, making refinements along the way.
Ms. Wells noted that Arizona is further along than any other state in the development of
quality indicators in its AHCCCS Medicare program, so the Health Care Finance
Administration ( HCFA) has indicated it will continue to be partners with it.
Ms. Yarbrough asked how it will become apparent the State is doing a good job. Ms. Wells
responded it will become known when AHCCCS members respond on surveys that
information they received on health plans was helpful and when the health plans indicate
they are being treated fairly, or in summary, when all parties are satisfied.
Mr. Barclay related there is also an accreditation effort being driven by national entities
such as NCQA, which has focused on bringing quality measurements and provider
credentialing to managed care. He referred to articles on NCQA which were distributed
to members ( filed with original minutes) which state 35 percent of the accreditation
decision is on quality management and improvement and 25 percent of the decision deals
with credentialing. He noted accreditation is becoming known as a benchmark of quality
STUDY COMMITTEE ON HEALTH
CARE QUALITY - SUBCOMMITTEE # 1
October 1,1996
Page 7
and customers are demanding it. Mr. Barclay indicated HEDlS is the measuring tool and
continues to evolve and expand quality benchmarks, becoming more outcome- based than
in the past.
Mr. Barclay noted there has been no similar system for indemnity plans and emphasized
managed care has facilitated the collection of data to initiate the measurement of quality.
He also noted that the Accountable Health Plan Act of 1993 contains provisions that
require health plans to file a quality assurance program with DOI. Mr. Barclay
recommended leaving this process of quality assessment to the private sector, Medicare
and Medicaid as opposed to putting it into legislation, as the area is evolving too fast for
legislation to keep up with.
Representative Gerard agreed with Mr. Barclay that it is not appropriate for the State to
be trying to set up a quality indicator program because the private sector is moving forward
with it. She also cautioned against the potential to develop different standards in each
state, and emphasized the need to allow the free market to do its job as it currently is in
developing national standards.
Mr. GrosJean distributed a handout entitled " Quality Compass," available on the Internet,
( filed with original minutes) which discusses national averages of childhood immunization
rates, mammography screenings, percentage of readmissions of mental health patients,
etc., and compares providers in specific regions to national averages for the benefit of the
consumer. He suggested this type of information becoming available may encourage
carriers to become involved with HEDlS to adopt standards.
Herb Rigbert, Medical Director, Health Sewices Advisory Group, explained his group
is the peer review organization for Medicare in Arizona and is currently known as the
Quality Improvement Organization. He related he was a member of the committee which
developed HEDIS 3.0 in Washington, D. C., explaining it has come a long way in linking
indicators to outcomes as measured by patient perception and will create a much more
personal approach to health care delivery. Dr. Rigbert indicated that for the past three
years under a waiver from HCFA, the medical directors of Medicare plans in Arizona have
been meeting every four to six weeks to establish a program which is apt to become a
paradigm for the nation.
Dr. Rigbert confirmed Ms. Yarbroughls observation that disease- oriented critical paths
were being standardized across health plans, adding this has been accomplished based
upon the health plans' own data along with a patient complement. Dr. Rigbert confirmed
this information will become available when standardized and it will be in a format
decipherable by lay people.
October 1,1996
Page 8
STUDY COMMITTEE ON HEALTH
CARE QUALITY - SUBCOMMITTEE # 1
Chairman GrosJean announced the next meeting will be held October 15, 1996 at 10: OO
a. m. in House Hearing Room 3.
Without objection, the meeting was adjourned at 11 : 45 a. m.
Respectfully submitted,
Alice Kloppel,
Committee Secretary
( Tape and attachments on file in the Office of the Senate Secretary)
ARIZONA HOUSE OF REPRESENTATIVES
Guests Attending Meeting
MEETINGT~,,~ i i'< r; r e,\ u4y < oe. nrn, it~ e or &\$ ~ 0 . Ll A I ~ D A T ED L+. \ 49b
I
NAME AND TITLE ( Please print) REPRESENT INC BILL NO.
ATTACHMENT -
ARIZONA STATE LEGISLATURE
JOINT INTERIM STUDY COMMITTEE
ON HEALTH CARE QUALITY
Subcommittee # I
NOTICE TO MEMBERS:
THE OCTOBER 29, 1996 MEETING OF SUBCOMMITTEE # I,
INITIALLY SCHEDULED IN THE OVERALL PLAN FOR THE STUDY
COMMITTEE ON HEALTH CARE QUALITY, WILL NOT BE
CONVENED.
MEMBERS:
Mr. Henry Grosjean, Chairman
Dr. Robert Dunn
Representative Susan Gerard
Ms. Constance Harmsen
Mr. Greg Harris
Representative Herschella Horton
Mr. Brian McNeil
Ms. Barbara Sutton
Ms. Mary Yarbrough
ARIZONA STATE LEGISLATURE
Forty- second Legislature - Second Regular Session
JOINT INTERIM STUDY COMMITTEE ON
HEALTH CARE QUALITY
Subcommittee # 2
Minutes of Interim Meeting
Tuesday, September 1 7, 1996
House Hearing Room 3 - 1 : 00 p. m.
( Tape 1 , Side A)
The meeting was called to order at 1 : 06 p. m. by Chairman Anne McNarnara and attendance was
noted by the secretary.
Members PreseM
Sandra A. Abalos, CPA, Abalos & Associates
Steve Barclay, Arizona Association of Health Maintenance Organizations
Dr. Arlan Fuhr, Vice President, Arizona Association of Chiropractic
Representative Sue Grace
Senator Mary Hartley
Representative Paul Mortensen
Representative Andy Nichols
Anne McNarnara, Ph. D., representing Registered Nurses, Chairman
Members Absent
None
Speakers Present
Kathy Boyle, Executive Director, Arizona Pharmacy Association, Tempe
Jim Drake, Banking and Insurance Analyst, House of Representatives
Chairman McNamara noted that she was elected to chair Subcommittee # 2 at the orientation mccring.
She reviewed the Subcommittee's charge to study direct patient access and point of service options
( see Attachment I ) . An excerpt from a National Conference of State Legislatures ( NCSL) 1994
publication on maternal and child health legislation was made available ( Attachment 2). together with
background information on stand- alone point- of service products ( Attachment 3).
Mr Barclay distributed an American Association of Health Plans direct access char1 ( Attachment 4),
and reviewed a staff guide entitled " A hrref .~. trrnrnarycf Heulfh ln. s~~ rancl. e~ ~, yw/ u/ rorrrr lA r~ zontr
IYYf- IYY6" ( Attachment 5, filed in Office of Chief Clerk) He commented on those licensed entitles
overseen by the Arizona Department of Insurance ( DOI) and noted the three different categories
under Title XX.
1 Insurers ( noting that in Arizona health insurance is known as disability insurance)
2. HMOs ( Health Care Services organizations)
3. Hospital, medical, optometric and dental service corporations ( i. e. 13luc Cross)
Mr Barclay reviewed significant statutes, including mandated benefits and disclosure fol- nis In regard
to coverage, and compared S. B. 1 109. accountable health plans ( Laws of 1993, Chapter 23 I ) w~ th
the federal KennedyKassebaum bill. He noted that all group provisions include guaranteed renew-ability,
restrictions on the use of pre- existing conditions and portability of coverage.
Responding to a query by Dr. Fuhr, Mr. Barclay pointed out that although there is no mandate to
disclose specialists as there is for primary care physicians, most organizations do so.
Dr Fuhr asked which providers are covered by S. B. 1 109. Mr. Barclay explained that all hough all
preexisting conditions were originally wiped, most were later reincorporated, with the exception of
the mandate to cover certain providers, including chiropractors.
Chainnan McNamara responded to questions and pointed out that the Committee's output could take
many forms.
Mrs. Grace requested information in regard to the direct access chart ( Attachment 4). Dr Fuhr said
he is aware that Maine began about one year ago. Mr. Barclay noted that many states allow direct
acccss to obstetricianlgynecologists ( OBIGYNs), and hrther discussion ensued.
Mrs Grace remarked that one law does not fit all fifty states
Jim Drake, Banking and Insurance Analyst, House of Representatives, offered to obtain lurthcr
information on the Maine experience.
Chairman McNarnara observed that Minnesota is also very prominent in the managed care lieltl. and
shc proposed that as much information as possible be assembled on other states' expericnccs
,,'
Mr. Rarclay noted that the Arizona law contains a specific nondiscrimination mandate that , + p p k s
onlv to Health Care Services organizations
Chairman McNamara asked if definitions for " point of service" and " direct acccss" are needed. Mr
Barcia" opined that while " direct access" is easily understood. " point of service" could hc clarified
Dr. Fuhr pointed out that chiropractors have fought to be qualified as licensed physicians for many
years, and said he believes clarification is needed.
Chairman McNamara confirmed that definitions will be evaluated at the next meeting.
Mrs. Grace proposed a review of obstacles that prevent access to specialties, and roadblocks to
preventative health care. She suggested soliciting input from employers on how decisions are made.
Ms Abalos pointed out that the decision is largely cost- driven, with benefits structure considered
second. She observed that small business owners have been forced to enter into preferred provider
organization ( PPO) networks, premiums increase every six months, and lack of portability is a
significant problem.
Mr. Barclay said while he believes people should have a choice of products, employer provided
coverage is down to approximately seventy percent nationwide, and increasing numbers of
dependents are losing coverage. He added that there have been no premium increases over the past
couple of years
Kathy Boyle, Executive Director, Arizona Pharmacy Association, Tempe, stressed the importance
of access to pharmacy services and noted a change in focus toward dispensing information as well
as services. She called attention to what she described as an alarming trend toward a requirerl~ cnt that
patients use mail order prescriptions as a cost saving measure, and said she believes patients should
have direct access to a pharmacist. Ms. Boyle pointed out that Arizona's hot summers create a
problem when drugs are delivered to mail boxes.
Mr. Barclay said it is his understanding that options are provided for, and he located and cited the
relevant statute which states that an organization cannot require mail order service drugs cxclusivelv
I4e pointed out that pharmacy is not a mandated benefit for employers.
Dr. Fuhr asked to see a study on the savings involved with mail order drugs
Chairman McNamara reviewed the agenda for the next meeting, to include definitions. an update
from Maine and Minnesota, and information on employer satisfaction based on factors other than
cost.
Mrs. Grace requested information on savings realized by use of preventative services, the number of
people covered, and dealing with long term care.
( Tape I , Side 13)
Mr. Barclay offered to locate speakers for the next meeting.
Chairnian McNamara solicited credible wellness data
Ms. rlbalos offered to report on any available small business community studies.
Dr. Nichols pointed out that long term care and assisted living facilities are becoming increasingly
important.
Chairman McNamara announced that the next meeting of Subcommittee # 2 is scheduled for
October I, 1996 at I p. m.
Without objection, the meeting adjourned at 2: 1 I p. m.
? r / 4; Lk / f L L u
Carole Price, Committee Secretary
( Orignal minutes with attachment and tape on file in the Office of the Chief Clerk. Copy of minutes
on file with the Secretary of the Senate.)
ARIZONA HOUSE OF REPRESENTATIVES
Forty- second Legislature - Second Regular Session
JOINT INTERIM STUDY COMMI'ITEE ON
HEALTH CARE QUALITY
SUBCOMMI'ITEE # 2
Minutes of Meeting
Tuesday, October 1, 1996
House Hearing Room 3 - 1 : 00 p. m.
TAPE 1, SIDE A
Chairman McNarnara called the meeting to order at 1 : 05 p. m. and the attendance was noted.
Steve Barclay
Dr. Arlan Fuhr
Senator Mary Hartley
Representative Sue Grace
Representative Paul Mortensen
Anne McNamara, Chair
Sandra Abalos Representative Andy Nichols ( excused)
Jack Towsley, Chief Executive Officer, United Health Care of Arizona ( UHC)
Dr. Jay Mayes, Vice President, Medical Affairs, Health Partners Health Plans
Dr. Leonard Rudnick, Chiropractic Physician, representing himself, Tucson
- .
Chairman McNamara asked if there were any changes or additions to the September 17, 1996
minutes ( Attachment 1). Mr. Barclay noted the following changes:
Page 2, second to last paragraph should read: " Mr. Barclay noted that the Arizona law
contains a specific nondiscrimination mandate that does not apply to Health Care
Organizations ( HMOs)."
Page 3, fifth paragraph, last sentence should read: " He added that there have been no
premium increases over the past couple of years in the HMO market in Arizona."
J O M INTERIM STUDY COMMITTEE ON
HEALTH CARE QUALITY ( Subcornrnince # 2)
10/ 1196
Mr. Barclay moved, seconded by Dr. Fuhr, that the minutes of September 17,
1996 as corrected be adopted. The motion carried.
Chairman McNamara referred Members to the September 25, 1996 memorandum from Jim Drake,
Majority Research Analyst, relating to definitions of " direct access" and " pointsf- service"
( Attachment 2). For the benefit of the public, she read each definition and asked for comments fiom
Members.
Pointsf- Service:
Mr. Barclay stated his belief that the reference to " managed care association" is an
inappropriate and misleading term. He recommended that language be changed to " managed
care plan" or " managed care company." In addition, he proposed to append the following
to the definition: " the person could receive services outside of the provider network typically
at higher coinsurance and deductible levels."
McNamara asked if there is a definition for company or plan. Mr. Barclay responded that
the terms are not defined. He noted that most people understand managed care but suggested
that perhaps the definition could include " use definition of managed care."
Chairman McNamara solicited comments fiom the public on the defmition. No public
participation was forthcoming.
Mr. Mortensen moved, seconded by Mrs. Grace, that the definition as amended
be presented to the Joint Interim Study Committee on Health Care Quality.
The motion carried.
Direct Access:
Mr. Barclay requested that the reference to " managed care association" be amended to read
" managed care company." Mr. Barclay recommended that after " penalty," insert " to all or
selected specialists." He said that this~ willallowf or both of the direct access products to be
considered.
Dr. Fuhr questioned whether reference to selected specialists limits the company again back
to almost controlling direct access. He stated that some obstacles are that one would have
to be on the panel of the company, and that the utilization criteria of the company is
unknown.
Chairman McNamara asked Dr. Fuhr to provide a recommendation. Dr. Fuhr deferred
making any recommendation until he has time to work on a suitable definition.
Mr. Barclay noted that these are simply definitions for purposes of discussion. He
maintained that if the definition is changed to require someone to go to any specialist in order
I O N INTERIM STUDY COMMITEE ON
HEALTH CARE QUALITY ( Subcornminu I21
10/ 1/ 96
for it to be called a direct access product, a lot of good products will be cut out of the market
that are helping address the issue of going through the gatekeeper.
Chairman McNamara recommended changing " enrollee's" to " provider's."
Chairman McNamara announced that the discussion of the definition of " Direct Access" will
be deferred to the next meeting pending further work.
Chairman McNamara referred to handouts distributed to Members on Minnesota where point of
service options were put into statute ( Attachment 3); and Maine's legislation relating to chiropractic
care ( Attachment 4), and basic health care needs of women ( Attachment 5).
Representative Grace noted that Minnesota has the most advanced HMO system in the country;
however, she pointed out that one has to look at other states' legislation in the context other states
are working under. She questioned how extensive Maine's HMO system is. Dr. Fuhr advised that
Maine is small in managed care compared to Minnesota.
Representative Grace commented that it would be good to look at other states' models of managed
care that have experience in the area. She maintained that Arizona is very different in managed care
compared to other states.
Mr. Barclay concurred with Representative Grace. He stated that review of other states' statutes
should consider the regulatory fiamework in place which may be different from state to state. He
pointed out that Arizona has an extra regulatory barrier that other states may not have. Under
Arizona's licensing laws, an HMO is not permitted under its own license to offer a point of service
plan; it must partner up with an indemnity insurer. He said that somethmg can be gleaned h m other
states but the question is how it fits Arizona's circumstances.
Chairman McNamara suggested using Minnesota's legislation for purposes of background
infoxmation. She asked staff to get more data fiom other states and to note the differences that exist
within those states. -
Representative Grace recommended that study be limited to the subjects of direct access and point
of service which have been addressed here.
Representative Mortensen stated that there might be a tendency to drift if too much material is
presented. He opined that the Committee should stay with the topics being discussed: point of
service and direct access.
Chairman McNamara asked Members how they would like to proceed. The consensus was to limit
the topic to the two issues being considered here.
Chairman McNamara stated that specific information will be requested fiom Minnesota for
background information. She asked whether other states would be sources of information. Mr.
JOINT INTERIM STUDY COMMITTEE ON
HEALTH CARE QUALllY ( Subcommittee 112)
10/ 1/ 96
Barclay said he is skeptical about how much valuable information can be obtained fiom other states
because every state tends to look at things a bit differently. He said that Arizona is ahead of other
states in terms of the managed care market place. He stated that the charts indicate that the pattern
is clearly on the direct access side to not make it direct access to all specialties but rather to selected
specialities.
PRESENTATIONS
Jack Towslev. C hlef ExecutlveUHCL testified that his
company has been doing business in Arizona since 1985. UHC is under the umbrella of United
Health Care Corporation. He advised that UHC is a for- profit corporation, and has 40 million
enrollees nationwide in a variety of health care products. Enrollment in Arizona totals 140,000:
17,000 in HMO products, 62,000 in point- of- service, and 75,000 in PPO and indemnity- type
products.
Mr. Towsley said that United Health Care Corporation has had a history of direct access or open
access- type products since 1982, and currently serves over 2 million members with open access type
HMO products. United Health Care has a variety of ways how it defines open access: the type of
specialists it includes and the types of referrals or mechanisms to have particular types of treatment.
Mr. Towsley stated that in Arizona, UHC offers different plans but has found that the market is
asking for direct access to all participating physicians. Based on research and what the participating
and prospective customers have requested, UHC launched its open access HMO product in Arizona
about sixty days ago. UHC offers two plans: ( 1) an open access HMO where a member is limited
to stay within a panel of participating providers or contracted physicians, and ( 2) a point of service
type product. In Arizona, UHC has defined open access as two physicians, M. D. s and D. O. s, who
are participating under contract with the company.
Relating to point of service, Mr. Towsley said that it is a product that is very healthy for UHC and
one that it offers as an option. He said that UHC continues to offer a wide variety of other products
to provide choice to the market.
Dr. Fuhr questioned the availability of physicians in allied health. Mr. Towsley replied that under
the HMOs, UHC has services for ancillary providers to be referred through one of the participating
physicians, but does not have direct access. Dr. Fuhr asserted that UHC's open access is really not
open access. Mr. Towsley said it depends on how open access is defined.
Dr. Fuhr asked whether UHC has data to support the statement that it costs more to have the allied
professions included. Mr. Towsley said he will have to check to see if that information is proprietary
to the company.
Chairman McNamara mentioned that she knows many people who choose to use somebody other
than an M. D. or a D. O. as their primary provider. She asked if the company has done research on
utilization. or has cost data that could be helpful to the Committee. Mr. Towsley replied that D. C. s
JOINT INTERIM STUDY COMMITTEE ON
HEALTH CARE QUALITY ( Subcommitte U2)
10/ 1/ 96
are available under the company's indemnity- type programs. Experience has shown that in terms
of cost in an open access type program, cost effectiveness is maintained by limiting to M. D. s and
D. 0. s.
Dr. Fuhr asked if the company has chiropractic panels in any other states under HMO products. Mr.
Towsley replied in the affirmative. Dr. Fuhr asked for data on what states have chiropractic panels.
He said he would like to know if there is history someplace else.
Mr. Barclay asked Mr. Towsley if there is a large migration from the more traditional products and
more traditional HMO- designed primary care gatekeeper products to the new point of service and
open access products being offered in Arizona. Mr. Towsley replied that with only 68 days of
experience in the new service, there is no history yet.
Mr. Barclay asked for further comments on the issue of limiting open access to M. D. s and D. 0. s.
He said he understands one of the fundamental principles of the way HMOs operate is that coverage
comes down to a question of having a medical professional make a determination of medical
necessity. He asked if that is the determining factor in the design of the product. Mr. Towsley
answered in the affirmative. He stated that in order for the program to be successfid, medical
necessity determinations are left to the participating physicians.
Dr. Fuhr asked whether a patient who is not happy is allowed to go, under his own referral, to a
specialist who is on the panel. Mr. Towsley responded that the specialist would be referred through
the gatekeeper. He declared that all patients are allowed to change gatekeepers if they are not
satisfied with the results.
Representative Grace commended staff on the material prepared on health insurance changes since
1990. She raised the question of legislative change dealing with fairness and applying the standards
across the board, and said she will look up the statute to see whether it applies to the above situation.
Mr. Barclay also applauded staff on putting together the material. He remarked that an interesting
point is that employer acceptance may be an obstacle to the notion that a nongatekeeper HMO work
in a cost- effective manner. -.
Dr. Fuhr declared that even though it is a changing marketplace, the evidence is that there is still bias
for people in his profession: D. C. s, 0. D. s and psychologists. He asked if there are plans to consider
the allied profession in UHC's plans in Arizona. Mr. Towsley remarked that UHC currently offers
a wide variety of allied professionals within its plans in Arizona. He said UHC is constantly
investigating and evaluating what the consumer demand is, as well as how to use its cost- effective
tools.
In answer to Dr. Fuhr, Mr. Towsley replied that prior- authorization plans are available that HMO
clients can purchase separately which allow for visits to a chiropractor. He said he believes there
are 10 chiropractors in the network for the city of Phoenix.
JOMT INTERIM STUDY COMMITTEE ON
HEALTH CARE QUALITY ( Subcommittee I2)
loll196
Dr. testif ied that the
company has a membership of about 380,000. About 85 percent of its members are in the HMO
product in the tiered access or direct access model. Health Partners Health Plans's model is direct
access to physicians primarily. There is a service model which does include direct access to doctors
of chiropractic. On the HMO model, there is direct access for chiropractic, vision benefits, mental
health, etc., depending on whether employers choose to purchase those options. The physician
network totals about 2,000. As a provider- owned and sponsored health plan, one of the things that
is important is that the physicians helped design the products.
TAPE 1, SIDE B
Dr. Mayes revealed that the tiered access model is about four to six percent more expensive than a
tightly- controlled gatekeeper- physician model.
Dr. Mayes stated. that Health Care Health Plans is the fastest growing health plan in Arizona. Much
of that is because of choice. The tiered access model allows a higher level of choice in that members
can make more decisions about their personal health care. Although the tiered access model affords
more choice, not all physician specialities are immediately available.
In response to Dr. Fuhr who pointed out that direct access leaves out the allied profession. Dr.
Mayes answered that D. C. s are directly accessible under the service plan He stated that Health Care
Health Plans has contracted with Landmark Chiropractic Network which has a network of about 100
chiropractors. He said he is not sure of the number in Arizona. Dr. Fuhr asked for utilization
numbers, as related to Doctors of Chiropractic specifically.
In response to Chairman McNamara, Dr. Mayes related that if individuals are using services which,
determined retrospectively, could have been taken care of in a different way, it becomes an out- of-pocket
expense for the physician, not the member.
Mr. Barclay cautioned against the use of utilization data. In looking at such data, concern should
be what is it being compared to. He asserted that a point of reference is needed, and said that
utilization data is not meaningful unless it compared to something else.
Dr. Mayes stated that point of service means that a member can access anyone who is on the
network. Members, at their own cost, can go outside of the network if they choose. He said going
outside of network is increasingly not the choice because of cost.
Dr. J .& R u m r a c t i c P h v s l c l a n . Tucson,
. .
testified that in 1992,
he was one of three chiropractic physicians approached by Intergroup. He said he went through the
application process and a very thorough credential process. He became a part of a program called
Interflex in August 1992. Since that time, he said he has had no patients; he has never had a referral
in four years. He stated that he has consulted with other chiropractors and they have had no referrals.
JOINT INTERIM STUDY COMMITTEE ON
HEALTH CARE QUALITY ( Subcommittee # 2)
10/ 1/ 96
Representative Grace asked whether there is data available, other than fiom other chiropractors, that
no referrals have been made. Dr. Rudnick replied in the negative. Representative Grace asserted
that the Committee needs to work from factual data. She said it might be helpful for Dr. Rudnick
to construct his own data based on how many patients he has and how many of them are in HMOs.
Mr. Barclay observed that there has been a breakdown of some of the barriers to include
chiropractors in health plans on a voluntary basis. He asked Dr. Rudnick if chiropractors should be
classified as primary care physicians. Dr. Rudnick stated that he has personally referred patients
back to the primary care physician. He said he has acted as a primary care physician.
Mr. Barclay mentioned the debate that has been going on relating to what chiropractors can and
cannot treat. He asserted that some chiropractors need to know their limitations as treating
providers. Dr. Rudnick said that he would compare the education of D. C. s with any primary care
physicians that have graduated in the past five years.
Dr. Fuhr maintained that the chiropractors of today are not treating out of the scope of their practice.
Representative Mortensen asked if Dr. Rudnick ever confronted Intergroup about the lack of
referrals. Dr. Rudnick advised that the response he was given was that " they were working on it."
He noted the prejudice and reluctance of primary care physicians to refer patients.
Mr. Barclay said he will try to get some data on one program he is aware of that offers chiropractic
without a mandate on their HMO products.
Dr. Fuhr referred to the distributed package of material which will be discussed at the next meeting
( Attachment 6). He said it is an overview of the gatekeeper and how it is changing.
Mr. Barclay agreed with Dr. Fuhr that lines of communication need to be improved. He also
distributed material that might be helpful: National Governors' Association's Policy " Managed Care
and Health Care Reform" ( Attachment 7), American Association of Health Plans " Consumers with
a Choice Among Health Plans Are Choosing: Network- Based Plans " ( Attachment 8), and a letter
fiom State Fund Claims Administration to sen& President John Greene dated August 3, 1995
( Attachment 9).
Without objection, the meeting adjourned at 255 p. m.
9 a n n e ~ el1, pbrnmitteeS ecretary
( Attachments and tape on file in the Office of the Chief Clerk.)
JOINT INTERIM SlllDY COMMImE ON
HEALTH CARE QUALITY ( Subcommiaec # 2)
1011196
ARIZONA STATE LEGISLATURE
Forty- second Legislature - Second Regular Session
JOINT INTERIM STUDY COMMTITEE ON
HEALTH CARE QUALITY
Subcommittee # 2
Minutes of Meeting
Tuesday, October 15, 1996
House Hearing Room 3 - 1 : 00 p. m.
( Tape 1, Side A)
The meeting was called to order at 1 : 05 p. m. by Chairman McNarnara and attendance was noted by
the secretary.
Members Present
Senator Hartley
Representative Grace
Representative Mortensen
Representative Nichols
Dr. Arlan Fuhr
Ms. Sandra Abalos
Mr. Steve Barclay
Ms. Anne McNamara, R. N., Chairman
S~ eakerPs resent
Anthony Ballew, Family Nurse Practitioner; President, Arizona Nurse Practitioner Council, Mesa
John Grubka, representing himself, M esa
A1 D' Appollonio, Physical Therapist
The Members introduced themselves.
ADD~ OofV M~ in~ ut es
Chairman McNamara suggested that the following change be made in the minutes of October 1,
1996:
Page 3, second indented paragraph should read: " Chairman McNarnara
recommended changing " physician" to " provider."
Dr. Fuhr moved, seconded by Ms. Abalos, that the minutes of October 1, 1996
be approved. The motion carried.
JOINT INTERIM STUDY COMMITTEE
ON HEALTH CARE QUALITY - SUBC. # 2
OCTOBER 15, 1996
Discussion of Meta- Analvsis of Studies of Nurses in Prima? Care Rolls
Chairman McNamara noted that the Members should have received information entitled, " Nurse
Practitioners and Certified Nurse- Midwives A Meta- Analysis of Studes on Nurses in Primary Care
Roles ( Attachment 1).
Anthony Ballew, Family Nurse Practitioner; President, Arizona Nurse Practitioner Council, Mesa,
testified that his main concern with managed care is access to nurse practitioners as providers. He
related that 25 years ago people did not know what a nurse practitioner was but that has changed.
He now has an office, and a phys~ cians tops by and consults with him a half day each week. If he has
a problem beyond his experience or expertise, he sends patients to the physician. He expressed
hstration because he has had to change practices twice in the past few years due to problems
encountered regarding payment fiom previous employers. When this happens, his patients do not
have access to his services. He added that managed care organizations will not list nurse practitioners
or physician assistants as providers, not even under the Primary Care Physician ( PCP) despite
repeated requests. 1 I
He submitted that good quality care is being provided as nurse practitioners work in collaboration
with physicians. The Meta- Analysis contains statistics, and emergency room physicians in Mesa
appear to be pleased with nurse practitioners and physician assistants working in the emergency room
and in the community. He related the fact that if he calls the emergency room in the middle of the
night, he has no problem being recognized as a professional; however, he cannot see the patient in
the hospital because he does not have hospital privileges.
Refemng to utilization and cost effectiveness, Mr. Ballew noted that the Meta- Analysis states that
nurse practitioners and physician assistants spend more time with patients than doctors. He agreed
with that findmg. He conveyed that in 1975 he saw three to four patients in an hour. Today he needs
to see six or seven patients an hour in order to generate enough income to support the doctor's
practice ( pay staff, draw blood, overhead expenses, etc.). Once a physician realizes the utility of
nurse practitioners and physician assistants, two, perhaps three, are hired, depending on
circumstances, and it becomes cost- effective.
He concluded by refemng to a " fight" with the Mesa School District about athletic physicals. The
rules have been changed to allow nurse practitioners and physician assistants to give athletic
physicals. The school district decided that it was not allowable but eventually changed its stand.
Now it has discovered that their physical exams are more thorough; some patients have been
disqualified from athletics, upsetting some of the coaches. The doctors never disqualified anybody.
Mr. Barclay asked ifthe use of hospital privileges by nurse practitioners and physician assistants has
been discussed with the Hospital Association. Mr. Ballew answered that there is a working group.
The hospital and health care association are working on it. The process is ongoing but slow.
JOINT INTERIM STUDY COMMITTEE
ON HEALTH CARE QUALITY - SUBC. # 2
OCTOBER IS. 1996
.
Discussion of Revised Definitions
Chairman McNamara referred to the October 9, 1996 memo fiom Jim Drake, Majority Research
Analyst ( Attachment 2). She noted that the Members have agreed on the " point- of- service"
definition so discussion today will focus on " direct access."
Mr. Barclay submitted that both are good definitions for a point of reference. Dr. Fuhr commented
that he was unable to find a better " direct access" definition.
Mr. Barclay moved, seconded by Senator Hartley, that the definitions be
accepted by the Committee. Tbe motion carried.
Discussion of Enabling Lemslation fiom Mi~ esota
Chainnan McNamara explained that the Subcommittee, at the last meeting, reviewed legislation fiom
the states of Maine and Minnesota. The Members decided that the activity of managed care in
Minnesota is, percentagewise, more like Arizona. Additional information was requested & om staff
regarding legislation passed in Minnesota in 1995 relating to point- of- service ( POS) options. A
document was distriiuted to the Members before the meeting which addresses supplemental benefits
available to HMO members in Minnesota ( Attachment 3).
Mr. Drake stated that the State of Minnesota is very progressive in terms of managed care but this
is one of those cases in which legislation enacted in another state is not workable in Arizona. He
explained that POS beneh are d a d to as supplemental benefits in Minnesota. Minnesota HMOs
are allowed to offer POS options and do assume some insurance risk. There are a variety of
heightened financial requirements and hoops to jump through in order to offer these options.
Whereas, Arizona's Department of Insurance ( ADOI) prohibits Health Care Services Organizations
( HCSOs) fiom engaging in this practice.
Mr. Barclay expressed his appreciation of Mr. Drake's research. He added that many HMOs are
federally qualified, i. e., licensed and regulated by the United States Department of Health and Human
Services. Federal law also limits the ability to offer POS- type products, and there is a restriction
requiring that 10 percent of utilization be out of network ( otherwise, the organization resembles an
insurance company rather than an HMO). In Arizona, because of the Insurance Department's rule
being even more restrictive, it is a moot issue. However, if that is changed, federal laws would still
apply in some cases.
Dr. Fuhr asked how many HMOs are federalIy qualified. Mr. Barclay estimated that at least half are
federally qualified. He added that it is not quite the seal of approval it used to be because that has
been supplanted with accreditation rules.
JON INTERIM STUDY COMMlTTEE
ON HEALTH CARE QUALITY - SUBC. # 2
OCTOBER 15.19%
Testimonv from Guest S~ eakers
John Gmbka, representing himself, Mesa, stated that he has been a member of an HMO- type
organization for about 15 years. Until 1986, he and his wife were residents of California and pleased
with their health care plan ( Kaiser) . Before moving to Arizona, he attempted to find other areas to
live where similar- type care is offered but was unsuccess~ l. He is disabled, with a mental disability
for manic depression, and a provider could not be found because of preexisting conditions. His wife
accepted a job with the State of Arizona. He opted for Intergroup because it was offered by the state,
then he moved into Senior Care High Option.
He said it has been two years since he has been on Intergroup which has contracts with different
providers. He would get comfortable with a psychiatrist or psychologist, and suddenly, he/ she would
no longer be a member of the plan. He said it has been difEcult but it has been a good group for him.
He has reached the maximum of care with his PCP, who has sent him to a neurologist, psychiatrist,
psychologist, orthopedic specialist, etc.
Mr. Grubka submitted that it was not until he was offered the opportunity to access chiropractic
d c e s three times a week that he actually obtained relief for his physical pain which means that he
no longer has to take numerous medications which make him drowsy and prohibit him fiom driving.
He said he did not believe in chiropractic medicine until he used the service but 25 chiropractic visits
over the last two years have helped him. He added that he had expected a quicker change but he does
have degeneration of the spine and other problems.
He stated that the chiropractic counselor has been vev helpfbl but he will have to start paying him
out of his own pocket because he has used up his allotted visits. However, he continued, he has
experienced better results & om this c o d o r than firom changing medications suggested by different
psychologists and psychiatrists. He stated that his PCP is planning to retire in ten years. At this
point, he is very comfortable with the PCP and the chiropractic services. He stated that a physical
therapist wrote a five- page report which was referred to his PCP but his PCP said he has already done
everything the physical therapist recommended and will not refer him to her. The PCP said if he
wants that kind of service, he will have to pay for it himself
He clarified for Mr. Barclay that he is Medicare eligible and is on Senior Care High Option which
offers gymnastic fkdities but it is limited in terms of who is authorized to provide those services. He
lives in East Mesa and the facilities are not nearby.
Mr. Barclay pointed out that since Mr. Grubka is Medicare eligible, there is a grievance process
through the Health Care Financing Administration ( HCFA) to handle complaints and problems. Mr.
Grubka answered that he has just become aware of that but he has a fear of being dropped as a
subscriber. Mr. Barclay stated that he has rights and protections under the law to pursue these
matters and encouraged him to do so.
Mr. Grubka said he has gone outside Intergroup for trigger point injections suggested by an osteopath
who is no longer in private practice. He went to his PCP who said he does not believe in the
J O N INTERIM STUDY COMMITTEE
ON HEALTH CARE QUALITY - SUBC. # 2
OCTOBER 15,1996
injections. His current chiropractor is recommending intervention with injection of steroids, and
Intergroup is refbsing to pay for that so he will have to pay for it himself, and it can be expensive.
Mr. Grubka interjected the fact that he did apply to CIGNA and several other plans before his wife
obtained state employment but he was not accepted because of preexisting conditions. He said he
is glad that she was able to obtain a state job and he could get into the plan.
A1 D'Appollonio, Physical Therapist, referred to the " direct access" definition which states that
patients would have access to specialists without going through primary care, and asked how
" specialist" is defined. Chairman McNamara answered that " specialist" has not been defined, adding
that testimony was taken at the last meeting fiom two difBent health plan representatives who shared
their definitions; however, the definitions were not the same.
Mr. Barclay indicated that Mr. Appollonio's question points out a concern that people will perceive
the definitions as something other than points of reference for the Members. He pointed out that no
insurer is mandated to offer a direct access or POS product. He indicated that testimony was given
last week that there is not even direct access to all M. D. s and D. 0. s. He said he thought that one of
the speakers testified that referral decisions for ancillary services ( lab work, x- rays, chiropractic or
physical therapy, etc.) need to be fbmelled through M. D. s or D. 0. s.
Mr. D'AppoIlonio testified that in Arizona physical therapists are licensed to see, evaluate, and treat
patients without a referral; however most insurance companies require a physician's referral. He
contended that this does not make sense. When legislation was passed in 1982, the whole concept
was to give the consumer the ultimate choice and reduce health care benefit costs, with the logical
assumption that someone with back pain can go to a physical therapist without seeing a physician
first. However, that is not the way it is. He remarked that it only increases the cost when a patient
goes to a physician who refers himher to a physical therapist, and he does not perceive this as direct
access. He contended that cost containment is possible without preauthorization of treatment. He
said his philosophy and treatment will differ from that of a D. O., M. D., or a chiropractor, and if an
insurance product is going to offer physical therapy services, there should be access to that service
without going through hoops.
Dr. Fuhr said he relates to Mr. D'Appollonio's testimony. Chiropractors fought for direct access
and insurance equality for 25 years, and attained that. Along came the HMOs, and the access right
was lost. He said recent data entitled, " Cost Effectiveness of Chiropractic Care in a Managed Care
Setting" ( Attachment 4) shows that direct access to chiropractic care costs about half the price of
conventional care. This is under a managed care setting with preauthorization. He added that
chiropractors refer patients to physical therapists many times because physical therapists perform
services that chiropractors do not. He encouraged the Members to read the document.
Discussion
Chairman McNamara asked the Members what they would like to take forward to the full Committee.
She noted that there will be one Subcommittee meeting before the full Committee meets.
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Mr. Barclay stated that he has information on alternative medicine and how fieedom of choice is
finding its way into managed care. He also has an actual policy fiom a company ( not an HMO)
located in Salt Lake City which offers the country's only holistic- oriented managed care plan. He
spoke in favor of providing a variety of choices for the consumer. He remarked that this is a
competitive marketplace, and imovativeness and responsiveness are needed in order to keep
consumers happy. He said he believes that the marketplace will respond, and has, in a way to
maximh choices available to employers and employees, which is much more effective than enacting
legislation.
Dr. Fuhr submitted that he does not think the marketplace is moving that way at all because
employers are still controlling it. He noted that Dr. Rudnick testified at the pevious meeting that he
had been with Intergroup for four years, and even though chiropractic service is offered, it is not
being utilized. Dr. Fuhr contended that there must be some kind of accountability to the plans. He
said freedom of choice can be discussed but he still believes there is a direct access problem because
the nurse practitioner and physical therapist both said they are having a problem. He noted that the
chiropractic profession is certainly having problems with direct access, and once they receive direct
access, problems are encountered regadhg payments. He added that CIGNA is now paying S 13 for
an office call, and practitioners are dropping out of the plan because they cannot afford to take
patients. He stated that this is not the marketplace running correctly. People do not sign up for
holistic plans but what is offered by the employer from the large plans in Arizona.
Mr. Barclay explained that CIGNA has a contract with a national provider network ( PCMC) which
provides the panel of chiropractic pbcians in the state. He related the following statistics regarding
CIGNA's usage of chiropractic services fiom the period October 2, 1995 to February 29, 1996 in
Northern Arizona:
There were 4,426 chiropractic visits and 745 patients which averages out to 5.7 visits
per patient. Of the 745 patients, 392 x- rays were taken.
He said this is certainly different f? om the Intergroup experience. He commented that it is far beyond
the purview of the Subcommittee to address provider compensation issues as alluded to by Dr. Fuhr.
He said he does not know what CIGNA pays the chiropractors but he has been informed that it
receives one request per week f? om chiropractors interested in joining the network. He surmised that
if it was so bad, there would not be such interest. He reiterated the fact that the Subcommittee should
not discuss the issue of provider compensation, etc. He added that he believes the chiropractor who
testified several weeks ago did say things have changed with Intergroup, and he is starting to see a
glimmer of hope.
Dr. Fuhr, referring to PCMC, stated that the reason people are calling in is because they have not
been in the plan and do not know what they would get paid. He affirmed the fact that chiropractors
in Mesa, with about a year's experience, are averaging % 13 per office call and cannot afford to take
patients. He suggested that the Subcommittee owes it to the main Committee to make them aware
of what is happening.
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Ms. Abalos stated that she has survey results fiom the small business community regarding health care
coverage. The information is taken fiom a state ballot sent out every year by the National Federation
of Inde! pendent Business ( NFIB) to Arizona small business owners ( groups of employees fiom 3 to
40):
Small business owners believe that the responsibility for insurance purchasing
decisions should be borne equally by the employer and the employees.
In 1995,33 percent of the business owners responding said they offered coverage to
all of their employees. This does not mean the business owner was paying for the
coverage. Twenty- one percent said they offered coverage to some of their employees
( probably the business owner and not the rest of the staff).
In 1994,38 percent of the business owners said they actually paid for health coverage
for their employees.
Small business owners believe tax incentives should be given to encourage small
business owners to provide health insurance coverage.
Small business owners believe that hospitals and physicians should be required to
charge health insurance companies no more than what they would receive under
Medicare.
Over 86 percent said they do not want mandated health insurance coverage but
fieedom of choice. In that fieedom of choice, they would like to decide whether or .
not to provide coverage to employees and the ability to decline certain benefits.
Small business owners believe that the business marketplace or the consumer, not the
govenunent, should determine what is included in health insurance policies. Instead
of mandated coverages, perhaps there could be a provision for options so they could
choose and customize the insurance policy based on the employees' needs, cost
considerations, etc.
Mr. Barclay asked if there is a trend in terms of whether the employer cost of coverage is going down
or remaining stable. Ms. Abalos answered that she tried to make a determination but the question
was not asked consistently over the last five years so she was unable to obtain a sense for that. She
added that in 1990, 46 percent of the respondents said they provided employee health insurance.
Sixty percent of those who did not provide health insurance said it was too costly. As of 1995, 33
percent are providing for all employees; 20 percent for some.
Mr. Barclay advised the Members of a discussion in another meeting relating to notch group coverage
for people above the AHCCCS poverty line. He indicated that health care coverage is extremely
price driven in the small group market, and it is very tough for small employers in a voluntary
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environment to continue to provide coverage. He advised the Committee to keep that in mind if
attempts are made to add any additional layers to coverage.
( Tape 1, Side B)
Chairman McNamara noted that the small employers do not want mandated benefits but do want the
option to decline certain benefits with the consumer making the decision as to what should be
included in health insurance policies. She asked ifthe consumer would be the employer. Ms. Abalos
replied that it would be a joint decision by the employer and employees.
Representative Grace asked Ms. W o s how many small business employers offer flexibility in health
care plans. Ms. Abalos replied that she does not know if the products that the small business
community are eligible for are very flexible. She surmised that the small business owner, in making
a decision, will first insure that the insurance product covers hidher own family to the degree that
they need or want; secondly, determine if it is acceptable to the employees; and thirdly, consider the
cost.
Chairman McNamara referred to POS and direct access. She asked if recommendations need to be
made from a small business perspective. Ms. Abalos conveyed a concern that if something is
mandated that would increase the cost of health insurance to the employer, it could hinder small
businesses h m providing insurance for the employees. She noted that if people have options, even
with POS, and it means they will bear an additional cost on their own, it is all right as long as that is
understood.
Ms. Abalos indicated that another health care survey has been sent out by NFIB. As soon as she
receives the results, she will share it with the group.
Chairman McNamara suggested that a position statement be prepared reflecting the discussion
concerning consumer choice and availability of senices but not necessarily recommending legislation,
to be presented to the hll Committee for decision making among the Legislators. Mr. Barclay said
it may be appropriate to have Mr. Drake prepare a draft for the Subcommittee to review.
Representative Grace agreed that this would be a good course to take. She sensed that the Members
are not comfortable with mandates and requested that Mr. Drake prepare a draft.
Chairman McNamara referred to the Kennedy Kassenbaum bill and asked the Members if they wish
to discuss its implications for the state.
Mr. Barclay said he believes it is being reviewed by Subcommittee $ 1, and ADO1 h& been reviewing
what needs to be done as a state in order to be in compliance in the next six months to one year. He
speculated that everyone agrees that the state plan should be customized to Arizona's needs. He said
the Kennedy Kassenbaum bill stipulates that if the state does not develop its own plan by a certain
date, federal regulations apply.
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Ms. Abalos conveyed the fact that Medical Savings Accounts ( MSAs) are included in the Kennedy
Kassenbaurn bill. The accounts have been in existence in Arizona for several years but small business
employers have not taken advantage of them because of associated administrative costs, etc.
However, since there is now a federal product, and Arizona has a program in place, she said she is
curious to see how the health care industry will be affected and what choices the small business
owners will make.
She explained that these accounts provide a choice for the consumer. A medical savings account is
set up, and the employer could choose a health insurance plan with, for example, a $ 2,000 deductible
to reduce the cost of the insurance product substantially. That $ 2,000 per employee would be placed
into an MSA, and the employee could see a physician and pay out of that account for heatlh w e
needs. At the end of two years, if that money is not spent, it belongs to the employee. Discussion
followed concerning specifics of the program. Mr. Barclay stated that it might be feasible to
recommend enabling legislation allowing state- regulated HMOs to offer a high deductible product.
More discussion followed concerning policing of the program, and long- term care implications of the
bill.
Chairman McNamara asked if this discussion should be included in the position paper, and the
Members agreed that it should.
Public Testimony
There was no public testimony given.
( The following information was distributed to the Members & om Dr. Fuhr before the meeting: Letter
fiom Dr. Rudnick, Tucson Chiropractic Center, Inc. ( Attachment 5); Special Article Does Increased
Access to Primary Care Reduce Hospital Rehissiom? ( Attachment 6); Chiropractic Patients Are
More Satisfied with their Care ( Attachment 7); Health of the Public The Private- Sector Challenge
( Attachment 8); Special Communications Ihe Epmalng Scope of State Legzslation ( Attachment 9);
and Health Care Policy: A Clinical Approach Capitation or Decapitation - Keeping Your Head in
Changng Times ( Attachment 10).
Without objection, the meeting adjourned at 2: 25 p. m.
( Original minutes, attachments, and tape are on file in the Office of the Chief Clerk.)
JOINT INTERIM STUDY COMMITTEE
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ARIZONA STATE 1, EGISLAI'URE RECEIVED
eUIrc ? I FRWY OcclnC
1- orty- second 1, egislature - Second Rcgular Session
NOV 8 1996
, JOINT INTEItIM S1' IJI) Y COMMITTEE
ON HEALTH CARE QUALITY
Subcommittee # 2
Minutes of Interim Meeting
. l'ucsday, October 29, 1996
Ilouse 1- learing Room 3 - 1.00 p. m. to 3: 00 p. m.
(' l'npc I . Side A)
' l'he meeting was called to order at 1 : 05 p. m. by Chairman McNamara and attcndancc \+) as notcd
by thc secrctary.
Menibers Present
Rcprcsentative Grace
I< cprcscntative Mortensen
Ms. Sandra Abalos
Mr. Stcvc Barclay
Arlan l: uhr. I1. C.
Ms. Anne McNamara, Chairman
Senator I lartley
Rcprcsentativc Nichols
Spcakcrs I'rcsent
. lim Ilrakc. Majority I< cscarch Analyst. I lousc oSI< cprcscntativcs
(' arol (' urc. Ikgistcred l. obbyist, representing (; olden Ilule Insurance Company
At thc rcqucst of C'liairman McNamara. the Subcomniittcc mcmbcrs briclly ilitroducctl
tllcllisclvcs.
Approval ol' Iblini~ tcs
Ilcprcscntativc Gracc moved that thc Subcommittcc niinutcs datcd
Octobcr 15, 1996 be approved as writtcn ( Attachmcnt 1). ' I'hc motion was
sccondcd by Mr. Mortcnsen.
' l'cstimon\! from ( jucst Speakers
. lim I) l. nkc. Majority I< cscarch Analyst. I louse ol'I< cprcscntativcs. ad\~ iscdt I i ; l r ('; ll. ol (' 111. c. \+ ot~ ltl
hc arriving at 1 : 30 p. m. to spcak about mcdical savings accounts ( MS, 4).
I > iscussion and Review of J'roposcd Subconimi ttcc Itcport
(' hairman McNamara explained that a prcliniinary suniniary rcport was dcvclopcd I>! MI.. I > l; lkc
( Atrachmcnt 2 ) based on deliberations in prcvious meetings. and mailcd to Comniittcc mcmhcrs
along with an invitation to niakc any dcsircd changes. Shc mentioned tliat she tool\ the Iihcrt!~ ol'
modilying the rcport cxtcnsivcly ( Attachmcnt 3). Sl~ cop cncd the floor to discussion on
h4r. 1) rakc's rcport.
MI.. I3arcla) said tliat given thc disparate vicws among Subcommittcc nicmbcrs. i t \ votrlci I,(%
dil'licult to reach any consensus on a singlc rcport. Given this, hc statcd his I'ccling hat
Mr. 1) rakc. s rcport capturcs the csscntial clcnicnts of previous discussions wllilc (' Iiai1.11i: ln
McNaniarn's rcport gocs into grcater dctail and niay hc considered inappropriate lhr blcndilig
purposcs.
(' 1i; lil- man McNaniara bricfcd Dr. 1: uhr. who arrivcd late. 011 thc actions of the Subcommittcc.
1\ 41.. I3al- cln! approved of the opcning paragraph under 1: indings in the " llrakc I< cpor~"
(. 4ttaclimcnt 2) and noted tliat the " McNamara Ilcport" ( Attaclimcnl 3) lacks similar I;~ ngu; igc
I Ic, suggested such disclaimcr language be included in tlic h4cNaniara Ilcporl bccil~ rsc ol' tlic
\ l: rstl! divcrgcnt vicws of thc Subcommittcc nic~ iibcrs.
I here was somc qucstion as to which rcport tlic Subcommittcc should work from. 1) r. 1; uIir
stated his prclcrcncc to work from the McNamara Rcport. ' l'hc consensus was to conduct a
~ r i -- parIagra p! i r c v i c ~ 01' tlic hlcNamara Ilcport .
(' li:~ irm: rn McNamara said tlic Ovcr\, ic\\ scction str~ tcstl ic purpose and ~ stablisli~ iicnotl' tlic
S~ lhcommitrcc. ' I'hcrc hcing no disagreement. the section cntitlcd Ovcrvic\ v \ vns no1 rnotfilictf
(' lx~ il- m:~ Mnc Na1ii: ira noted that tlic Mcmhcrship scction mcrcl! lists mcmbcrs. ' 1 I1~ 1. c. I , c.~ n:, n o
disagrccnicnt. this scction was not modilicd.
I lie Subcomliiittcc Socuscd on paragraphs 1 . 2 and 3 undcr tlic I'roccss scction. ' l'licrc king no
clisagl- ccnicnr. this lang~ lagew as not modilied.
1: ocusing on paragraph 4 undcr thc I'roccss scction. Chairman McNarnara cxplaincd that shc 11scti
thc contro\~ crsialt crni " specialist" with the understanding that i t would bc li~ rlhcrd isc~~ ssc~ cl.
1) s. I * ullr conI'Csscd that the tcrni " specialist" \+ as a major point ol'contcntion Ihr him.
(' II; III- I~ MI; Ic: N~ an~ arae xplained that paragraph 5 undcr thc I'roccss scclion lists t